The property is in a C- neighborhood and he keeps the property barely above minimum standards. 

My husband has a rental property currently in downtown SF but his father has managed on his own and has barely raised the rent over the past 5-6 years.  

He cannot afford the water bill due to excess water usage and is barely able to cover the payment plan he has setup with the city.

The plan is to enclose the carport into a garage, swap a small den (that I think used to be a bedroom at one point) into a 3rd bedroom, remodel the hall bathroom (its pink tile everywhere!!!)

I am used to dealing with homes that were barely priced under the Freddie, Fannie price guidelines to being in small town KY.

Nope i barely had rent at the time because it kept going up.

-What I would like to do is fix it up (bare minimum), sub lease for a year as an MMJ friendly rental (higher price tag), then buy it at the end of the contract with conventional financing or something creative.

Apparently they are barely used in the business.

As far as what to look for, the taxes there are way higher than here in Georgia, especially in Shaker, I barely factor them in around here, got clobbered with them on one that went long up there at $8k/yr. 

So the fact that the market would not bare any more than $375K upon ARV didn't matter to us, except in negotiations.