So far he has been keeping to himself, which is just fine by me.

He wasn't able to write new business but was doing a fine job taking care of his current customers.

Many posting here will challenge investing in Midwest properties based up on appreciation, but the Midwest is appreciating fine!

If the water heater worked fine at the inspection but leaking at the final Walk Through, they’d have to fix that.

For me it is about long term planning and I am fine with slow and steady of buy and hold. 

I would not invest if the good guys are losing ground, but that would run counter to your description that it is an appreciating area.It looks fine to invest in for the information you shared if the long term forecast for the area is safe and stable to improving.

Some lenders are fine with this, some are not.

I have notified our lender (the old seller) in which they are fine with the title change to an LLC (with no due on sale clause), but are not willing to change the payee of the note, in which the mortgage will remain under our personal names. 

If they have a lot of people there, that's fine, just be strict with your numbers. 

My lender said a residential loan would be fine for a mixed commercial and residential zoned property.