My wife would not be thrilled with emptying out the savings.

I have been at the REI game since 1992, I have a rule that has saved my butt many times, you can't force a deal.

You could obviously use the HELOC, or borrow the down from your 401k, you could save cash for a down payment and get standalone financing for the new buy, or any number of things.There's plenty of SFR near you that would cost less then 165k, and I'd be tempted to use just as much equity as I needed to put a down on the first one and get it rolling before repeating the process.I wondered if you'd ever heard of the Infinite Banking Concept?

I think they would take less since its been on the market awhile, but I'd like to have money to do improvements and cost saving measures. 

That way you will save yourself $20k which you can use to buy another deal.

I estimate this overhaul would save about $200 per month in utilities across the gas (boiler) and electricity charges.

Save it for repairs and for the down payment on the next property.

I usually don't see 12 month of property tax in escrow but that's the only place I see that you can save money upfront (the money in escrow is still your money).

I do have a small bit of capital in savings.

The only saving grace I have right now, for that plan anyway,  is that I have a friend who is an appraiser in the area and has agreed to look at comps to get a good since of what the ARV will be.