As a side note, I know there can be some issues with a landlord "acting as a utility company".

But it does make me wonder if we will find any other major issues that I haven't been made aware of because the tenants have lived there for 8 years.

This, notwithstanding all the other issues that have been mentioned.Being innovative and a trailblazer is great but it has to make sense, because trying to reinvent the wheel is often the thing not to do.

Price may be the biggest issue impacting your vacancy.

- At what rate atl RE you intending to issue your loan to the builder?

I'm told the issue is that it's hard to not step into "practicing" real estate when you're trying to share information about the property that you have under contract.

Problem with that is I would have to have to take out an original conventional loan to start, then right away refinance and get double hit with the lenders fees.I know I will run into the same issue as before where the money is essentially locked into equity because of the small loan amounts if I move forward and purchase this now house for $65k. 

There may be some issues with this one...fyi.  

Having the money is the lease of issues .

The overwhelming majority of legal issues between renters and landlords are security deposit suits.