What’s unique is that the basement only has an exterior entrance so if I added rooms to the basement, they would essentially need to walk outside to have access to kitchen/bath/laundry.

Walk through every unit, not just one.

@Aaron Hartsough there's honestly no one size fits all answer to your question.

Ive said this house needs a second bath right from the start and have gotten nowhere(even the realtor said it needed one), the biggest problem I see in this scenario  is that I really wanted and needed someone who has done many of these with the mindset of the investor/REIA  to walk me through, not my dear hubby who although very talented in what he is capable of doing isn't very good at organization, timeliness, of follow through, therefore he has now quit on me and Im stuck trying to learn AND figure this out and not lose my shirt in the process.I had my realtor walk through the job with me and try and help refocus me but I really even need the financial piece played out at this point .

For Hard money terms, I know a few lenders, around 10-12% If you are you looking for traditional loan terms, many local banks may give you 80%LTV as long as it's more than 4 units, and the the deal fits requirements.

Offer an LOI.Once the LOI is excepted, then do your due-diligence (walk every unit and audit every lease).

Hi Brie, Some things I always recommend are to walk the tenant to their vehicle after you show the property or hand deliver a lease to their current rental to have a better idea of their cleanliness and how they treat their personal property. 

So, let's say the timeline fits and I could sell that house in a 1031 exchange, can I then use those proceeds to buy and renovate that property?

title company will walk you through it since AZ is not an attorney closing state.just negotiate the rate of return.. do check your usury laws and make sure your not violating those.. title company wont do that for you.lender may need to be licensed but commercial non owner may be exempt I know in NV its not neither is Oregon or CA  but most states have a carve out if its a one off IE its the only loan she makes and she does not hold herself out as a lender in any means..not really complicated. 

If you want to walk all the units (highly recommended) as part of your inspection/due diligence, put that in the offer.