And even if so, I'd imagine there would be LOTS of restrictions and red tape as to what you'd be allowed to build and its appearance - No?

We advise landlords to require two main criteria:1) Household income should be at least 40x the monthly rent.2) Applicants must have a credit score of 680 or higher.It's also important to review credit reports for red flags like rental collections or high credit card balances.

We've been looking primarily in the Red River Gorge (KY) area and also in the Hocking Hills (OH) area.

LA cash flow is certainly deep red. 

It will also not raise any red flags to the underwriters that you might end up doing a bunch of work to the subject property which can be seen as added risk for them. 3.

That's a red flag for someone trying to use a business-purpose loan for owner occupancy, so many lenders won't allow it. 

Quote from @Luke Carl: You get what you pay for here  Meaning too low cost would be a red flag?

Even though this would also be an equally small loan, banks can't turn those down if your credit is otherwise good because that is considered red-lining which is illegal for owner-occupied loans.

Any red flags or important clauses to include in our contract?

Look more into a long term hold strategy, if I can get an interest rate where I can break even or even go in the Red a little where the house is being paid for mostly by the tenant then I will look towards the appreciation down the road.