I can't speak to your energy prices there, but you can use heat pumps in that climate year round.

Way too much liability exposure to you; no upside to your bottom line by granting their request.

Sadly enough it's a business that you're running and have to do what's best for your business, the bottom line and your other tenants that are in the duplex. 

  - Wet rot down to bottom most layer of floor boards- Cracked tiles- Rotted beam next to tub- Re-sheetrock and put shelving back together- Bath vanity set aside but not damaged- Tub is metal shell type, not solid- I can live without a bathroom for a few days to 2 weeks.

Our plan was to include the rehab costs in a traditional 30yr fixed loan, then buy and hold the property renting to year round tenants. 

I currently have a rental in the town in which i live but it was purchased back when the market was rock bottom here in CA, now its too expensive so I am looking out of state.

Only part that seems bulging a bit is the bottom left portion maybe 30 brick section bulging forward a bit. 

The bottom seam of the patch is just below the top of the mirror. 

For me it would have just been an extra expense that I didn't need and would have gone against my bottom line. 

If the tank runs dry you will have maintenance expenses to get the system running again or if you skip them costly repairs from the sludge that builds up in the bottom of the tank.