Furthermore, the backyard of this house slopes down into a ravine; however, that can be fixed with fill dirt, retaining walls and the proper drainage systems.  

With that tenant is going to go your furnace, appliances (if you're naive and supply them), hot water tank and about another 3-5k in cosmetics.

the house has been encroaching the building line (house was built) 20 years ago or more,most title companies in Chicagoland will insure over the encroachment for the Owner's Policy at no cost to Seller/Buyers.HOWEVER, violations of the building lines on the side of the lot might be different particularly if the house is ALSO  encroaching over a drainage or utility easement.You don't tell us the number of feet of the setback on the side of the house and if house also encroaches an easement.Perhaps you could even attach a copy of the Survey, assuming you learned of the encroachment from a Survey.Good luck.

Bottom line here is keep your rates on par with the rest of the market, you get to decide to buy a big 4/2 a few blocks from the water or a 3/1 a few miles from the water.

water heaters?

It’s usually good for $10-$40 per unit each month if you set it up right.Car wash station is another where you have a dedicated spot with water and power and sell cleaning supplies/rent a Vaccum Have your tried renting out your model unit as a short term rental as an amenity for tenants that have family visiting and don’t have the room to accommodate

In general, I'm curious if this is a good investment opportunity long-term and what other information I should know to help make the decision.Here are some of the numbers:Property Value: Estimating ~$800,000, but it hasn't been officially appraised since it was purchased 10 years at $500,000.Taxes: $4,000Insurance: $2,100Year Built: 19125 Total Units: 2Br/1Ba, 2Br/1Ba, 2Br/1Ba, 1Br/1Ba, StudioUtilities: Owner pays only water and trash.Mortgage: Despite being zoned as a 5-plex, the property has been approved for residential mortgage previously (one unit classified as storage during appraisal).Previous Gross Rents: $45,480 (previous owner was very generous with rent to family/friends)Estimated Gross Rents: $69,600 (based on market value)Previous Annual Expenses: $12,500 = 27% of gross rent. 

When you can, jump in the pool and test the water.A little caution with that water, as unless you have a good idea what's under that surface, going head first is not the choice I would make.Just don't expect to get in the water and jump out clean and dry the first time.

Rough numbers roof 10-15,000, boilers $5,000 each, chimney removal or rebuild, could be $5000, plus kitchen and water infiltration/mold.  

That building will probably be old and have a boiler with no separately metered water.