Again, your sales price will be hurt by these things and sellers will get turned off by them, and you can't eliminate the busy street or eyesore power lines or water tower across the st, etc. 4.

right it is the tricky part that would scare me but knowledge is power

Apart from the big  what-ifs (HVC, roof,... ) you also have to clean gutters, mow grass, fix holes in the wall, etc.Do you own a lawnmower, hoses, ladders, power tools, all the stuff you need for patching and painting ?

Structurally I know it will last another 100 years easy. 10 rooms at 500 a week is 5000 a week minus 7 dollars a day for food and power is 500 a week for expenses.

The powers that be sat back and saw these things (geez I'm kinda sounding like the bible now) and the powers that be said Wow we have made lots of money with mortgage and now these poor little ants are starting to gain wealth too- Lets let them enjoy for a quick second and take it away.

But more power to him - if he was able to do it.

Any junior liens would cloud title and taking a DIL would mean loss of priority and power of foreclosure to clear those junior interests.  

Conservatively, the cost of building a new house here is around $200/sf which puts buying the house, and building a rental beyond my buying power right now. 

This isn't a situation where you are likely to have negotiating power, so don't bother trying. 

You need staying power. 3) Only you can decide what works best for you.