Currently, the back house is not permitted as a living area but I believe as a "Carriage house".

I understand each city/county may have their own permitting requirements, fees, regulations, etc. but I'm wondering how people are making any return on their investment if it maxes out at 90 day rental.

Those workers will need a place to live! 

One year later, still no permits, and just raised the price of our home by 20%!

Would I rather own an AirBNB in Galveston for the next five years where a permit currently costs $250 a year and a correctly bought deal can still perform exceptionally, or in NYC where I can no longer operate now and for the foreseeable future?

Quote from @Li Kia: Yes, these are all legitimate deductions.You are technically only permitted to charge them a depreciated value.

I also look up the property on the county website to see if there were any permits pulled for the work recently done.

Do they have the land, permits, zoning, etc. locked up for the new builds? 

A contractor will tell you anything is possible but that usually comes at additional cost and time.Challenges - We had some hiccups in the beginning of the project that got our project held up in permitting and added 2mo to our project.

(Other financing arrangements might be possible.)You can only obtain one home equity loan per year, even if you have fully paid off the prior home equity loan.Regulation of LendersTexas restricts who may lawfully issue a home equity loan.An unlicensed person is not permitted to make a home equity loan unless that individual is either related with the borrower to the second degree, or is the seller and is providing financing for the property.A home equity loan must be secured only by the home itself, and the lender may not attach the loan to any additional assets as collateral.