Do you like that house well enough and do you plan to stay there a good while?
Do you have a budget for this expense and the incidentials that WILL come up during this process?
The house needs to be off the ground and that rotted wood needs replacing relatively quick.
What this entails, as you know as your neighbor had to do this. The house could be jacked up and installed with a peir and beam foundation. Which would be much cheaper than somehow installing a slab. I think slab is definately out of the equation.
Pier and beam foundation is the best route. But, you will need to jack the house up at least a foot or more, then the piers have to be on well tamped down and solid dirt. This is more to it than you think. putting a pier on unstable dirt will only sink and create more problems, so you want to do this only once.
Now, incidental two, your plumbing and all will have to be added on to to allow for the rise of the house.
Front and back entrances will have to be raised to meet the higher house.
You do have quite an expense upon you and remember what ever quote your are given, there will be those, "oh by the way, this has to be replaced and so on and so on......" So have another 20% or more ready for incidentials.
Then rotten wood replacement is another issue, this could be just some joists or a bunch of joists. But, all rotten flooring and joists must be replaced.
Tough call for you to make.
How much did your neighbor spend on this project? YOu are lucky because you have the issue right next door.