They see the potential but not willing to move into a neighborhood with the current status.

At any rate, you can still grow a tax free rental portfolio and work towards achieving one of the statuses mentioned above to turn passive losses into active and start offsetting some of your other income. 

Most of the board members had been there a long time and were very familiar with the financial status of the Association and of the co-owners who lived there.  

Or keep things status quo?

You MAY get 1%/m gross in a multi that you also want to live in - not forgetting to subtract the percentage that you miss out on because of your occupier status - meaning that it'll be a fight to find something that'll cost you less per month than if you rented there - but I have confidence that you have the right attitude and foreknowledge to succeed.

Getting up refinished and repainted and up to new status...

@Ulises Rodriguez your friends lender is requiring it to assess the financial and status of the HOA that the condo is in.

So, there's a good chance that you'd have less trouble with someone that is concerned about keeping their legal status.

Status of the application?

When I was a full time agent in Chicago I always checked the status of attorneys, lenders, etc, on Yelp because the good ones are almost always there.