In Massachusetts, towns are passing energy codes that increase the cost of housing.

I replaced all the wiring to code with 12/2 & upgraded the panel to 200amps $2800 in materials.

Additionally, the property I have for sale is located in the 48205 zip code, which I later found out is considered a "red zone."

That is a vacation rental that my family and I use for a few weeks out of the year so it is not strictly investment.

I had to manually go into my listing and change it back to Strict. 

There is verbiage in Section 11.131 of the Texas Property Tax code that states that exemptions only apply to residence homestead, defined as the portion of the property that is occupied as a primary home.

As mentioned above check your local laws regarding STR, occupancy, building code etc.If good on the above, then figure out your cost. 

Mind you, there are some states, specifically NY where you could be on the hook for code issues on vacant properties, even if you are just the lender, so best to do your homework on each state. 

From what I've seen through pictures, the quality is sub-par (e.g. bad patching, no primer used, no corner bead used, etc.).I have recently started to get more strict on timelines (this is now 2mo delayed), and now he is halting the work.

Every "problem" is an opportunity, it's just coded, and needs to be deciphered to be seen.