So after putting up all the money the property went to auction and drew no bids and the certificate holder now owns a vacant lot in the hood with municipal liens that survive the process well exceeding any value the lot could ever have.  

When the housing bubble burst, contractors in general likely found themselves in a survival mode as was the case for me personally.

As far as buy and hold, I would recommend Jeffrey Taylor's The Landlord's Survival Guide as property management is critical to buy and hold. 

Lastly, 1. depending on where the property is located, you might be able to raise rents and still be inside the rent cap. 2. if the property currently has debt, most Agency debt have restrictions that survive the LURA and may further impact you ability to take the property out of the affordable housing stock. 3.Are you under and HAP agreement?

Maybe I am missing something but even though the mortgage may be getting paid off and your making a 10 percent cap rate I don't see how you would survive say a roof repair or even afford property management. 

Consider a larger area, is the small town a bedroom community of a larger city, or is it miles away having to survive on its own population?

That's a survival income but not making good money by any means.

., I've been thinking that if I can survive the renovations and get the properties rented (I'd like to hang onto the properties if I can, selling is less desirable back up option) then I would try to secure a HLOC to consolidate my debt, but I've been wondering about the debt to income being a problem.

. :) Need guidance/advice on how to survive with this field.

Survival of the first rental property, and then dipping toes into what other possibilities there to take advantage of.