Quote from @Jonathan Greene: What is your plan for wholesaling? 

As a result, utilities eat up about 30% of gross rental income each year (and will probably go up a lot more this year).

Option 3 - Still move to the new house, as originally planned, but just eat the extra cost.

They would eat up those returns with the opportunity cost of money sitting there.

We already got their conditional approval in writing, pending the design plans and actual application, of course, but the only requirement in the application we must meet is setback requirements to be approved (which we know we will) so basically we have the green-light from the city to move forward.

I checked out David Greene's Long Distance Investing and BRRRR books and thought it would be better to buy in another state because Denver was so high priced.

I think I'm on to something and pretty sure I already have the green light.

We will need to get creative to not eat up all the backyard, but doable with a 2 story building.

I'm willing to eat a little bit of this but seems excessive?

Ask yourself, if I do this and it goes south 3 months into a 12 month lease, can I afford to eat the holding costs until I get out of it.