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.  

Before that you're just running around with your hair on fire wondering why you ever got started!

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. 

That I didn't look like my picture (sorry, but I was cleaning the unit all day and didn't wear make-up and had my hair in a ponytail). 

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.  

7/16/17 - Stopped at the house and it is drying out very nicely.

Another thought was to keep one of the units with the walls and just upfit it for a Salon and then rent out each room separately to hair dressers, nail business, massage business, tanning business, etc.