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1942 Lake cabin- buy/tear down/rebuild?

I have been drooling over an original 1942 lake cabin in Washington State for a year. It just came up for sale ( it has been vacant for a year) and I believe it is being marketed as a tear down- for $550,000 !!  I am interested in exploring the idea of renovating as a year round house on the lake. it is within 200' of shoreline, so there are permit restrictions on new construction. I was able to go inside with the realtor- it needs everything ! the foundation is not good, but not sure what they entails. It is only 675 square feet, has knotty pine paneling, a brick fireplace, but all the electric, plumbing, no Hvac system.  Is this a crazy day dream....or is it worth exploring, and what steps should I take to evaluate a reasonable offer and expectations for total renovation budget?

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