After researching a bit into local subdivision ordinances, I've found that the likely reason the city will not allow the separation is due to either minimum lot size and/or minimum frontage distance on a public street.

Just purchased my first buy and hold rental and interested in local and long distance investments.

-After your moisture issue is corrected, have your contractor install plastic moisture barrier, followed by your stud wall with a 1" stand off distance to prevent moisture accumulation.

@Alex Jones thanks I’m going to press pause and order both BRrrr & long distance real estate.

I bet there are 4+ great meetups every single month within driving distance for you, all with a significantly better group to network with.I've been to one of these stage sales funnels so it would be hypocritical for me to tell you that the networking at these events is 2/10, but they're a waste of time. 

I would venture to guess that the criteria from investor to investor varies, so what is it exactly that you look for when evaluating a potential long distance deal? 

@Kanessa Page My thoughts are this...A lot people do VERY well with it, but alot of people don't do well at all.It all comes down to being educated about what you are doing and building a boots on the ground team in that state.I HIGHLY recommend @David Greene 's book on the topichttps://www.biggerpockets.com/store/long-distance-real-estate-investing-ultimate

are you willing to commute a little ways? 

Stay with a property that continues to lose money, and you are distancing yourself further from profitability, and reducing your ability to get there...which one of your later statements says you already know this."

My commute to work is drastically reduced.