@Alan G. is also right when he describes the local banks that hold their loans and another definition that some call a "blanket" or "portfolio" where there's more than one loan covered in the loan. 

I learned a lot, but never did anything with the knowledge other than the home purchase described above.

Frankly what you have described is a cherry deal for an operator and a crap deal for a buyer with those kind of lease terms.There are many other properties to choose from.

If there are any areas of walls that need dings and dens fixed, I would be inclined to mark them on the wall and describe them in the scope.Make sure to indicate very specificallythey are required to clean up after themselves and to not clean their tools in your finished sinks.

With the model that you describe, you take on all of the risks of the renovation.

Then meet with the city planner and describe to him what you would like to do.  

Of course, you can't stop people from using it to describe a home that looks "decent" by photos. 

Then go find those markets, camp out there, and execute the plan.What I just described above is my system that I do, and teach.  

A "portfolio" loan would be better described as a loan for a 1-4 family unit property.  

But I now realize that the text in your post fully describes the way I feel about some people running the regulatory institutions, including the top dogs in Washington.