Find a way to improve the physical property AND the operations to increase the revenue and decrease the expenses. 

I'm from Los Angeles and things are very expensive here.

Not a bad idea but expensive and not guaranteed. 2.

Due to most of my dirt work expenses and public water expense.

Using it as a DP on a income propery you can deposit your rent checks directly into your HELOC account and withdraw your expenses from the same.  

It does a really good job heating the place but definitely could get really expensive if a tenant was not concerned with conserving.It is a fairly old home and we have done a lot of repairs and updates on it.

I'll have about 20% of the purchase price in the bank but I will not be putting 20% down, this is saved for minor updates and to cover for unexpected vacancy expenses, I'll be going for an FHA. 

I'm looking to lower some expenses since interest rates have risen.

I doubt they would move if you deny the request and I doubt $225 of insulation will make a significant difference in their utility expenses.

Hopefully your rent + HOA will cover your expenses.