The key for me came after reading "The Seven Habits of Highly Effective People".

I'd almost say your logic is beyond faulty -- its dangerous.Rather -- and I would not say this applies to Dante, specifically -- but the habits we take going into a deal mean far more than the deal itself.You cannot make money if you cannot align your income and expenses properly.You cannot make money if you overspend/spend more than what you make.You cannot make money if you are undisciplined in financial and operational matters -- you may be able to show short profits, but I think long-term success is highly predicated on proper planning, forecasting, adjusting, and action.To me seeking out a profitable deal to "right the ship" is like buying an advanced set of lottery tickets.

My next step would probably be a letter to the landlord/manager stating that you’re tired of losing hot water and that’s an expectation of habitability.

He states that because we didn't request a permit for adding the unit, (the building was set up as 6 units when we bought it) he will require us to add sprinklers to the building to allow the unit to be deemed habitable.

In a hot market time is key so speeding up the ability to get answers to questions is vital.

Keep it in habitable condition, keep making progress toward market rent, and let her choose when to leave.  

In fact, the one that was there 12 years, we make it a habit to at least go by once a year. she would go by, bring photo of our kids, and the tenant's wife would go through photos of grand kids, and they both enjoy coffee and cake at the house.

Step one is building $25k by changing spending habits and finding ways to reduce expenditures which may be easier to do while still a full time employee. 

The tenant sues the landlord for breach of habitability because there is no water. 

Your team will be vital in obtaining financing as well as the performance of the property.