One of the tenants, which was inherited by the previous owner, has been paying rent late consistently (for the past 4 months) and by late I mean at the end of the month (rent is due on the 1st).

Low purchase price and owner-occupied loan to keep down payment and carrying costs low to fund the construction costs.

You also have sellers who are financially less literate and make knee-jerk decisions.To your point, off-market deals in B and C neighborhoods are often overpriced, because the owner felt that their house is worth more than what the 5 agents they asked for an opinion told them.

The owner is selling one of the rentals and the assets are incorrect.

Ask yourself this, would it make sense for me as the owner of a mortgage company to basically generate a customer for a loan officer and pay them out top-dollar when they were handed a lead or should I hand that deal to a loan officer assistant to get through the pipeline and keep the revenue?

I'm assuming you are hiring a builder which is why I put that in the price. if you are general contracting it yourself you could hire an owners rep for maybe a flat 20k and drive the cost down by 50k and get it just to a lucky two bedroom, 1 bath per side.

Will they stay on after you've become the owner? 

Current home owner just got back to us today and said he has an FHA loan on the property but the property was passed down for 2 generations.

I know David Zumbrunn (the owner) is licensed as a title company in PA.

She stated the owner lives and is from California while the rest are located in the Philippines.