Sounds like you are getting hit with a lender who has overlays and possibly miscommunication between the loan officer/processor to the underwriter.

Since it sounds like you have strong W2 income and would probably be okay paying the mortgage sometimes, I'd even explore a 5-10% down payment option.

So it sounds like me you built additional equity into the home your living in now.

I'd say they chose colors that don't create any curb appeal at all...In this case the front sounds like it was cluttered, so the way to increase curb appeal was literally to de-clutter. 

That definitely sounds illegal.

The primary risks at this point would be       1) to your lender, the risk of a margin call.       2) To you; underestimating the true cost of a project and cost overruns      3) To you; legal risk of securities regulations if  So it sounds like im not missing anything on the risks, from your perspective at least. 

The cop sounded lazy or dumb to me.

This sounds like an unnecessary and potentially problematic step.

This sounds like a great investment.

It sounds like you're doing great research ahead of your first flip.