Currently has window A/C and radiator 2 of the units.

@Marquez Davis You can expect a lot lower leverage with land purchase, but as @Sasha Mohammed said, there are products for ground up construction that roll the costs (horizontal and vertical) into the overall construction budget.

They are willing to sell, but it would need to be at a good price because it needs things that my side already had done (roof update, windows). 

To name a few HVAC for unit 1 is 20 years old and could not fully inspect the heat, the pipe to the sewer has completely dropped and is not connected, in basement the window header, subflooring and joists are damaged from termite activity, and their needs to be some tuckpointing and masonry work done for the exterior brick. 

one of the developers across the street from my project is selling 1k sq foot homes for 525k  I suspect he has sold a few but you get the point. when lot costs and building cost before you even go vertical are about 250k pretty tough to build anything new that is "affordable." its why condos and townhouses are generally starter or the cheaper housing..

Fyi, the discussion went like this, she said I want a wrap around porch, grey siding with white trim, bigger windows, french doors, stainless appliances, black barn doors and shutters, etc., after which I put my foot down hard and said “dark grey or light grey siding?”

Also how do I make sure all secondary damage such as gutters, siding, windows etc are covered and accounted in insurance claim.

Does the loft have windows in case of fire? 

An IRS lien, code violations (weed abatement, grass cutting, boarding windows-doors, and demolition costs), HOA fees, water- sewer bills all go along with the property providing the property has any of these. 

If it increases by more than 70k, then it's a considerationYou need to make sure that you can turn it into another bedroom that has windows for means of egress.