I've had properties in the past needing the sewer line dug out due to cracking etc.. so floated the idea of knocking all of this work out at the same time but at the moment only interested in doing the water lines.

You need to get the entire scope of work out of him, or his replacement BEFORE you even think about moving forward on this project. 

This may be hard hard for me since I an intending to stay in my primary residence for the time being and financials for down-payment mayn't work out.

The math just dosn't work out. 

I was curious how the numbers work out if its a house with a basement versus a house with concrete slab..

I’m going to try to re-run the numbers just out of curiosity (based on Grant H Willcott’s response) to see how close it would get, but I predict this might be a deal that might not work out in my favor at this time.

Ideally, it'll work out to where you have a good pulse on the market(s), and you can sell your current property vacant and in good shape and get market value for it.

And I’m no expert (still trying to figure this part out) but I believe once you close and get the home rented out you can refinance the home and if the numbers work out then you can get your down payment back to pay off your HELOC by tying it into the rentals refi at a lower fixed rate. 

Feel free to reach out with any questions, or if you or someone might have such a potential deal that we can work out. 

You would either work out some sort of loan modification to get them re-performing, get a deed in lieu that will get you the property without foreclosing, or foreclose the person.