But it does make me wonder if we will find any other major issues that I haven't been made aware of because the tenants have lived there for 8 years.

This, notwithstanding all the other issues that have been mentioned.Being innovative and a trailblazer is great but it has to make sense, because trying to reinvent the wheel is often the thing not to do.

Did you pull the permit and still violate the issue that needed the variance? 

Price may be the biggest issue impacting your vacancy.

- At what rate atl RE you intending to issue your loan to the builder?

Problem with that is I would have to have to take out an original conventional loan to start, then right away refinance and get double hit with the lenders fees.I know I will run into the same issue as before where the money is essentially locked into equity because of the small loan amounts if I move forward and purchase this now house for $65k. 

There may be some issues with this one...fyi.  

Having the money is the lease of issues .

The overwhelming majority of legal issues between renters and landlords are security deposit suits.

Like @Dave Rav mentioned, a lot of fires happen due to cooking issues in the kitchen.