I am sure properties on the water have lots of potential. 

The main house has a pool, so it adds complexity because of the increased water bill.I have though of two options, one is to make the main house foot the bill, but that will surely cause me issues down the line when they start questioning the use of water and electricity of the other tenants.The second option I thought of is to include all utilities also for the main house, so me footing the entire bill.

Usually when paint 'doesn't stick', it is because someone applied water based paint over oil based without priming first.

I'm basically at water level on this, and I don't know that other investors could make this cashflow any more than I could without me selling at a huge loss. 

Do you look for an acre with city water and electricity and build on that or do you put in your own?  

I was thinking I'd buy an acre of land that has city electricy and water available, and pay that off so that it can be used for collateral one house at a time.  

Does federal lands have water and sewer running thru it?

We also do a walk through, set expectations for maintenance, filters, lawn, garbage and go over the function of GFCI's, shut off locations (water, power, gas).

If you have rain water run off to their yard they will get you finned.

The place could also survive on LT rent or seasonal rental, which is popular in this quaint village on the water for Summer and shoulder seasons.It's one of those two-story old 1890 brick buildings.