Since they notified you of this, you should get it taken care of as your insurance may not cover a claim if there is an accident because it was a known defect.

It's a former adult care home, so the layout is shared bathrooms, and this would allow me to not have to change the plumbing layout while offering a competitive price-point and unique experience to travelers.

You've clearly put a lot into it, you clearly cared, so why build it all just to off-load.

Typically  issues are raised when the exterior is not kept up with / parking on grass / garbage in neighborhoods where everyone takes pretty good care of their homes.If you keep it clean and run a tight ship, you should be okay most of the time.

The short answer is I look for 9% min and try to press it to 11% with those strategies along with rental increases once improvements are made and the tenants know you actually care about the property.

Just keep your eye on the numbers, be patient, and, if the path feels a bit winding at times, remember that most of us have been right there the ones who kept at it ended up with the sweetest returns.Take care, Pat & JasperTurning investment visions into REALITY in Phoenix, AZ - Ranked #1 for residential real estate growth and opportunity by PwC

I always say 'I don't care what cap rate I buy at, I care what cap rate I can turn it into'I built Market Analysis and Sales Comps tools for my local SoCal market that will let you analyze the current or terminal property & units, from wherever you get your deals from:Sales Comps & ARV estimate:Sales market analysis:Rental market analysis:Would love to discuss how to make your extension that much better!

I was told they take care of everything when setting up LLC.

If you decide to build new construction, be very careful with builder contracts out there. 

I think you are best served to get the best advice and that is what will make your business work much better than the ones who don't care about the regulations.