Easiest option for to me would be to rent the place out at a possible loss and treat it as a savings account.

Is that feasible?  

Clean it up a bit and rent it out at a potential loss or walk away. 

In the off chance they don't the large upfront cost is supposed to cover any possible losses I believe.

Because the SBA Lender’s approval is subject to different factors, i.e. a lender might be pessimistic about the borrower's industry or may have recently suffered losses in the borrower's geographic area, it might very well happen that although the borrower is fully qualified, he might still be rejected by the SBA lender.The following situations necessitate the use of a private money lender instead of a SBA lender:The buyer’s credit is spotty.The buyer’s company took a hit during the Great Recession.The seller has offered to carry back a second mortgage.

Hello South Jersey-ans,I am one that believes in one persons loss is an others gain (NOT BEING MEAN HERE BUT REALISTIC) Is there now an opportunity to buy low now and sell high later now?

If you can avoid vacancy/turnover loss, you will come out ok.

And then when she went to sell them she would have taken a 30 to 40% loss..

Putting your other expenses, rent loss and capex at about $4500 on about $20K gross income.This seems tremendously low to me.  

I don't think I saw this question asked yet, have you been to the permit and zoning office yet to see if this tear down and new build is feasible?