Inspection went well- I guess. Since we are planning to almost gut the place and start over I guess there was no need to really go over everything with a fine tooth comb. Our contractor acted as the inspector, and basically talked numbers with us.

Learned a few things:
The upstaires renters have been living there for 14 years. So there is no lease- and I do not feel the need to create one. They pay $600 a month.

The building is coded for section 8 housing. The upstaires renters are section 8 and the downstairs renter is section 8.

The downstairs woman has lived in the unit several years as well but is ill and has gone to live with her daughter. She is planning to move her stuff out and vacate the apartment- but the government assistance checks will continue to pay her $500 a month rent until that day comes (and based on the stuff in there I dont think it's coming too soon).

The air conditioning unit is about 3 years old, the water heater is about 1 1/2 years old.

No sign of termites.

The building is in better condition than the contractor expected, it is only tilting about 1/2 an inch instead of 3 or 4. (I guess this is good news?!)

Because it is section 8 housing the place has lost a lot of it's historical character. The molding is 80's, most of the wood floors have been covered in tile or carpeting and we are not sure of the condition. The ceilings were dropped down to make room for ductwork, and almost everything is a handyman special repair.

Now for the down and dirty numbers:
The contractor gave us a worst case scenario price for everything we might possibly want to do and it is up to us to whittle down our wants into our price range:

Structural
Lift the house $2500
New electric $2500
1 Window repair $500
Stairs (build Trim & handrail): $3,000
Total:$8500

Downstairs
Kitchen: Heart Pine & Raised Floor: $4,000
New ½ Bath under the stairs: $4,000
New Kitchen (Including appliances & labor): $14,000
Raise the ceiling $2,000
Plaster, paint, trim $2,000
$26,000

Upstairs
Guest rooms (Carpet & raise floor): $2000
Plaster,paint & trim $2,000
Bath upgrade $1200
Masterbath/Master bedroom $7,000
$12,200

Finished Attic
Carpet/paint/demo $3500

Total:$39,220

So those numbers dont scare me. When we did a walk through to look at the place he told us he could do a complete upgrade for about $40k- so thats what we had prepared for.

The plan going forward is to continue renting the units through August while BB is away. The combined rents will pay for the mortgage and expenses -$120 / month. If the downstaires renter chooses to vacate by April- we already have a plan to rent to some baseball players in town for the summer and can charge them $800 a month. Therefore the mortgage/taxes/insurance will be completely covered.

In September when BB returns- he and the contractor will work everyday together to get the project completed. The project is estimated to be a month long.

BB and I will take out a $40k HELOC to complete the project. BB has promised me to stick with the budget- he promised he will not come to me requesting more money. He knows that after $40k the well is dry. If we stick to the $40k HELOC our finished investment will still be about $80k below what the current upgraded comps are for on the street, and I want to be sure we are definately in a position of immediate equity when the reno has finished.

Monthly mortgage/expenses plus HELOC will leave us paying about $800 a month out of pocket once we have rented the unit of the house we currently live in.

So thats where we are with the project. I know things will go wrong but the whole project is too far away to even worry about right now.

I am just glad we have a gameplan.