You'll need to identify the jurisdiction for real numbers but the lack of a will shouldn't affect much. 

I will need to pay off the existing mortgage ($451k) with a construction loan; at most I can put in $180k toward the build but not sure if that is wise to put so much of my own money in.So far my best option seems to be to partner up with an experienced developer/builder who can put down cash towards the construction downpayment *and* qualify for a bank construction loan.

That is the major problem in developing a relationship with tenants.........They never have the same expectations as the landlord.

The prohibited transactions (the don'ts) are very clearly identified by the IRS here:https://www.irs.gov/retirement-plans/plan-particip...So in most cases there is very clear line between the do's and don'ts.

@Dean Ingraham,I own 3 quads in a similar development. 

Contractors can only bid on items that can be identified as issues/rehab at the time of the bid. 

Medical tenants have heavy TI when they go in so if building is really outdated and old they may leave to a new building completed by a developer with all the new bells and whistles unless you just have the best spot in town already. 

This semester I am taking a real estate investment class and part of my final project is to identify regions within the United States that we think would make smart investments.

With the time it would take to develop this, I can justify the extra expense it’s just hard to pull the trigger on it.

If you own the land you don't ever have to develop it if you don't want to.