My concern is whether the city could deny permits for these modifications, such as removing walls or converting a garage, or if they are mainly just concerned with safety and habitability.

Amassing a lot of debt and being only able to make lateral moves if I sell is certainly a huge concern of mine. 

If you have one abuser, it won't affect everyone else systems.One thing not mentioned that could possible be a concern is were they are placed. ie. are they all positioned well for inspection and/or replacement if need be?

You have hit ALL of the areas of concern that I have with using my account for buy and hold or fix & flips.

I’m not terribly concerned about the house since the layout would make it easy to survey & subdivide to make it two parcels.

I do get you having some concern maybe going into winter in WI and wondering if tenant activity will be there to fill a vacancy (with lots of leases and moving around happening spring-summer).  

If cash flow is a concern it's a big one usually 

Is it possible for us to form an LLC and 1031 these into one 1.5 million dollar property in Oregon so long as we abide by the timing guidelines concerning the exchange. 

A SSN is typically issued with “permanent residence” (green card) meaning the person becomes legally allowed to live and work in the US.

My concerns with them would be:1.