I'm assuming it's heating oil due to the above ground oil tanks at the other end of the basement.In any event I need to get the spill up before removing anything else out of the basement like the hot water heater and old galvanized plumbing.

If I think I can make $35K in a hot market with only a cosmetic rehab, I work the real numbers.

Even if the property improves you are still trying to catch up with a break even value because you paid too much for seller finance.The market cycle today is too hot for sellers to want to finance the whole deal and banks will not touch you for that.

But as my experience grew that math doesn't look that hot no more.

During the appraisal, there a hot water issue found so our realtor out in a request to have it fixed by Fannie Mae. 

The building is in Fresno, CA so pretty hot in the summer.  

If you buy here to hold, make sure you hold onto it for a long time - it will eventually pay off in spades, and in a very low-risk manner, but the cash flow won't look very sexy on paper for a while.Hopefully something in here is helpful to you, sorry for the wall of text. :)

My area is really hot and nothing goes for less than $200k, so mortgages for $35k are difficult-to-impossible.

The next step would be to work with the Realtor and determine the hot markets, in your County, with the greatest number of sales over the last 90 to 120 days.

As Rich said, you've got to say whether this is steam or hot water, completely different systems.