My concern for you is that it appears that if the owner comes back, they only have to pay the bid amount + costs, not what you paid for the broker.

I am also concerned about possible mold in the basement.What should I do?

Basically the concern is they tie up the property, collect enough rents to make a little bit, and then just default.

My concern is whether the city could deny permits for these modifications, such as removing walls or converting a garage, or if they are mainly just concerned with safety and habitability.

Amassing a lot of debt and being only able to make lateral moves if I sell is certainly a huge concern of mine. 

If you have one abuser, it won't affect everyone else systems.One thing not mentioned that could possible be a concern is were they are placed. ie. are they all positioned well for inspection and/or replacement if need be?

You have hit ALL of the areas of concern that I have with using my account for buy and hold or fix & flips.

I’m not terribly concerned about the house since the layout would make it easy to survey & subdivide to make it two parcels.

I do get you having some concern maybe going into winter in WI and wondering if tenant activity will be there to fill a vacancy (with lots of leases and moving around happening spring-summer).  

If cash flow is a concern it's a big one usually