If the sale price is lower than the assessed tax value, apply to get them reduced with the sales data.

Do you see much opportunity to boost rents or reduce utility costs?  

Refi at higher value, reducing cashflow to $100/month, but putting $50K in play for you. 

I am wondering how hard it would be to create a mortgage for this note which in my opinion would reduce the risk .  

My reason for considering conventional is: I have the money to put 20% down, the mortgage payment would be lower, which reduces my overall cost of living.

Track all properties income and expenses you are responsible in report form with people you feel comfortable with and understand your goals and all of you might reduce some of your expenses and increase your income.Do not assume anything.  

I suspect HUD will reduce the number of new vouchers it offers, reduce payments to landlords a bit and maybe cut some overhead (although government is never good at doing that, so who knows).

I haven't done any lease options myself, but in my experience as a realtor, you will greatly reduce your pool of potential buyers.If your property has increased that much in value, another option would be to carry back the loan yourself.

We are trying to reduce sound transmission between our ground floor and the second unit apartment, both of which are completely finished.

There are a fair number who commute from Baltimore to DC, but that number really swells as you get further south.