The owner is pointing to this line of the lease and stating that it is the tenant's responsibility to pay for the mold test after she reported that there may be an issue (as stated in the lease to report immediately).My question: who is responsible for the payment?

Thinking something aling the lines of a right to begin work clause?

The condo is 2 bed/1.5 Bath and can be converted to 2 bed/2 bath for $10k.

That may vary by state law, but that's at least my line of thought. 

We have one small 2 bed 1 bath rental house that used to be our primary residence, but now we are renting it out.

Under the list of "protected classes", the 10th line item is:"Source of Income The lawful source of a person’s income, including wages, a voucher having monetary value, social security, public assistance or other related payments."

I am trying to see where to find financing to turn this 8 unit office building into a bed and breakfast with 8 rooms. 

If you want more accurate information, ask a realtor to pull you comps for a rental house with similar square footage, beds and bath located close to the property. 

Far better for me to position assets for them to benefit from at arms length than to saddle them with their dad's passion.Bottom line I am a huge fan of the 1031 used well. 

In many cases zoning has changed over time so that the property line setbacks and minimum lot sizes are much larger, which could render your lot useless for new construction.