Paint the interior walls and floor of the basement with a product called Dry-Lok.

Mold and rot occurs from the moisture not drying.

So it looks like subterranean and dry wood termites.  

I recently had to replace the entire backside of the unit with almost $3000 worth of hardy siding because I was tired of paying $800-$1000 a year (on average) to replace wood rot.  

Able to pay is also an important detail on the demand side ... in 2006 you had plenty of demand, but the only way they were able to pay those market prices was with unsustainable lending practices ... when those dried up and owners were no longer able to pay, demand dried up and those foreclosed homes added to supply.

I let this dry overnight even though they say its good after an hour. 

I don't know the KC area, but here in Florida we've got so much moisture and termites these old houses can look fantastic sometimes, but behind the sheet rock are rotted away, and there will be plenty of deferred maintenance. 

I'd lose sleep knowing I had equity rotting.

If the asset type you are in drains you dry mentally and financially then it might not be the optimal path on RE for you.     

Inherited tenants are like fist-holes in dry wall; hard to deal with but they may be reason you got a great deal on the property in the first place.The whole psychology of inherited tenants is problematic.