Arlington county has relaxed its standards for accessory dwelling units (https://housing.arlingtonva.us/plans-reports/accessory-dwelling-ordinance-update/).

Also, we find that the more often we're able to turn units, the more often we can make incremental updates and raise rents toward the higher end of market rates.In my opinion month-to-month makes up for any loss-to-vacancy since it's making up for it with higher rates and therefore helps avoid loss-to-lease.As a side note, we allow short term rentals of 3-6 months on new leases at rates of 125% of the 12 month market rate and have had great success with these options as well.Other options we've done are allowing tenants to choose their renewal rate on buildings we're aggressively raising rents on by say they can pay 3% increase for signing for another 12 month term, or 5% increase to stay moving forward on a month-to-month lease. 

And you would be spending more in demo and more to essentially build a new house versus updating an older house.All that being said, I am confused about your idea that the foundation is rotted and may need to be demolished.

Here in DC where most of my clients are based the city has recently updated to the 2017 IBC (international building code).

Updated houses in the neighborhood list in the 500k-750k area depending on their state and amenities. 

On top of that, everything is linked to my bank accounts so I almost have nothing to update manually.

You can link your accounts up so the data is refreshed and updated in real time. 

Get Schaubs book:Building Wealth One House at a Time, Updated and Expanded, Second EditionAmazon for about $30Great for starting and reviewing if you've done a few houses.Napier's book is good, too. so is Rich Dad Poor Dad as just a good read.

Average rent for the occupied units is $726/mo ($7,260 total).  4 of the 12 units have been renovated, the remainder could use some minor updating but could be done over time as tenants turn over.  

I'll provide an update as this unfolds....