OR Gut the 1000 sq ft and change layout to modern SFH and rent it out or sell it.

I made the same argument at first as well for someone with multiple rentals (As I do for like...home office deduction, if you're managing 5 rentals, collecting rents, screening tenants ect...I am comfortable taking that deduction- I was going to apply same here but saw a no aggregation wording) 

I bought the lot 10+ years ago to prevent a slash-and-burn developer from getting it and putting a home that wasn't right for the historic neighborhood (it's not designated, modern homes look extremely out of place here).  

Though I'm a licensed real estate agent, in southern CA there are some REALLY well established offices that work the high end listings, and have their marketing down like a well oiled machine.

Long-term appreciation is big because I wouldn't intend to sell anything until retirement (30+ years from now) I am also in a very high tax bracket and hopeful that real estate investments may enable more deductions.Commercial:1) I've shied away from retail strips due to feedback from banks desire to not lend there and overall amazon impact2) Looking primarily at small office complexes (2-4 unit) with service businesses - anything to look at for with office buildings?

It looks like a modern-ish interior design, but that's not going to help with the morning commuter who just wants to zoom through your drive-through and get back on the road. 

If not can you refer me to any agents or offices that specialize in foreclosure properties?

Look for higher rent rents via non-traditional/modern rentals:- AIrbnb/STR-Leasing fully furnished-Rent by the room/Student hosuing-Assistance living, etc.

I was sitting in a lender's office waiting for the banker, when I spotted this article. 

Let me know if you want to talk in detail about it; I'm Chief Investment Officer of a REIT based in NYC.