Adding a walk in closet to to lower bedroom that will most likely be a guest bedroom or a child's room, wont do anything for the salability or marketablity of the property.With a home of this size you want to sell life style and comfort more than anything else.

Was wondering if this is the best route to go or would it be better to use extra money to give me and my wife's ira and 401k a big boost.

They sit in front of the TV and treat life as if it goes on forever.

As for economics, most lenders want properties to have an economic life longer than the mortgage.

Nothing wrong with that, but the live-in types typically make that place their life.

Being on the same page as your life partner is another advantage that you have. 

Sounds like the P&L may have been boosted by deferring maintenance - you'll prob. want to adjust for this.    

I've bounce between Dallas and Colorado all my life, minus a year and a half in Spain.  

The fact that someone in the past got a better deal is just part of life. 

After helping so many investors with their properties, and seeing them go on vacations, plenty of cash flow, and a virtually stress-free life (in large part due to our professional property management services), I'm ready to do it right this time.