The pictures left little to be desired, but the property was actually in better shape than expected as the seller had begun the rehab project and ended up prioritizing several other projects over this one. 

I admire your desire and ambition to build wealth.  

Unless it is in very desirable location and city, I doubt homes will appreciate like before.

It also means less livable space, less storage, and less desirability. 

Putting aside any less desirable  aspects of your note, if it has been performing for over a year I would think it is worth more now than it would be if you refinanced and then tried to sell with little or no payment history on the new note. 

How desirable is the location? 

I am currently living in the Fraser valley but I have no desire to invest here.

I have a moderately upscale single family rental house in a desirable neighborhood.

It's not a desirable product for lots of reasons, but there are people who use this strategy. 

Sold previous home, desire to have a rental property as an investment.