On my previous townhouse, I paid it off completely in a similar fashion. 

On the surface this deal seems marginal at best, likely falling in the "not deal" territory and that is without considering how hard you would have to work to even make the deal happen.

One thing I've learned about this issue is to use a high clay based dirt packed against the foundation will minimize the freeze-thaw & torquing of settling, by diverting surface water from being able to cause these issues. 

Recent renovations include all common area carpets replaced, new windows in all but 6 units, a new boiler 3 years ago, a new roof 4 years ago, and all suites are in good shape, several renovated recently.There are 9 paved surface parking stalls.This property presents a value-add opportunity through sound management with rental increases, as rents have not been increased in 2 years.We want to raise $500,000 to close on the property.

Old fashioned but effective.

Judges have been known to give back entire security deposits plus damages which is typically triple the amount of the deposit when the landlord doesn't account for it in a timely fashion - even if they were due the entire amount because of excessive damage.

I'd be able to collect about $850/month in rent this way.Alternatively, I can collect from a stranger the good old fashioned way.  

We had to dig through it to make a path to the roll off.Insurance claims guys says probably not covered because it was surface water.

Unless you anticipate going in during or after the rehab to do it yourself, make sure you include in the bid, things like:- Trim- Painting - Light fixtures/fans- All floors and surfaces as you imagine the tenants using- Landscaping - Etc. 

You will not be able to complete it in such a fashion.