For instance, you may be able to build 35 units per acre, but does that take into account parking requirements, water retention, market demand (the community may not want condominiums or townhomes), how much will it cost to build all of the municipal requirements and at what price will it sell. 

There was sewer water standing in the powder room on the main floor, in the mud room (also impacts our washer dryer units) as well as the kitchen sink. 

Previous owner also never charged tenants for Water, Sewer and Trash.

My question is would you spend over $600 on a water heater?

And as a follow up- Will applying for financing muddy the waters of ownership?

The land is just sitting there vacant and will require grading, a water meter installation, and septic to be added.

.$120 below market x 4 units x 12 months = $5,760 per yearIn two years, that's enough to add a roof, replace all the water heaters, replace a furnace or two, etc.I bet I'm being conservative.

We always explicitly request shots of the roof, HVAC, Water heater, Electric panel, and all major rooms, exterior, and the neighborhood. $25-28 a job.

It has sewers, but no water.

For example, last year I saw a terrible water leak that was fixed by the new buyer which saved the new owners about $60,000 per year.