One of my biggest challenges is overcoming my naturally pessimistic nature. 

Bathroom lacks any storage)- Open up kitchen to living room via wall removal, creating breakfast island w/ more storage (unit is approx 650sq.ft. and kitchen has very little natural light)

Essentially I just need to find out cost and procedure for getting it permitted as a SFH or ADU. 

Granted, it is above the fence and not in the middle of the yard, but my biggest concern is downed power lines after a storm or something of that nature. 

However if he is mismanaging his properties to where they are unsecured and/or nuisance properties, he may be what some call a slumlord, which is the natural enemy of code enforcement (and the neighbors) 

As opposed to naturally occurring affordable housing or workforce housing, targeted affordable housing means the property has rent or income restrictions in place to maintain affordability for an extended period.Through the TAH Express program, borrowers benefit from a condensed prescreening process, simplified nonnegotiable legal documents and a standardized underwriting process, resulting in lower transaction costs.

You'll be 5 figures into fees, possibly years worth of court procedures/litigation, and most likely eventually settle that the seller pays you $6k and for each party to pay their own legal expenses.

When I first started reading posts on BP, I was shocked at how very different those laws/procedures can be from one state to another.But to your original questions, I don't provide any utilities for my rentals, since they are all separately metered. 

If the repairs are structural in nature I would need to get a 203 loan. 

5321.16 Procedures for security deposits.