So shouldn't the total ROI be somewhere in the results factoring in the built in equity at purchase of $40K?

That needs to be factored in with the amount of consideration given for the option by the TB.Whether you stay on and manage it as a rental or not depends on whether you are assigning or sandwiching.  

In my mind this would be a top decision making factor if I was interviewing investment realtors.  

Most of us factor 8% to 10% on vacancy.  

As a real estate investor, what are the key factors that drive the rental markets?

What are some of the key factors do as a real estate investor look for in an agent

I'm interested in similar areas where there is a sound local economy and plenty of opportunity combined with lifestyle.

Location is one of the biggest factors.  

I would do all the capital improvements as you mentioned so  maintenance is not a factor down the road especially in your cold area of Buffalo

Rentometer.com is also a good source for area rents but I don't think they factor in heat included or not in their calculations.