It seems like it has the most upside, but I'm sure there are horror stories around pulling permits and dealing with the city. 

When we have investors approach us about a purchasing a condo as an investment, we steer them towards a townhome, preferably with a pool, if their budget permits.

Before he started the work, on multiple occasions I had requested proof of permits, the actual estimate, and at least something in writing.

You need all before the permitting process (at least here in WI.) 

For the most part (particularly Fort Lauderdale and Miami) requires permits and inspections of your str. if you operate it without having the permit you can get heavy fines and get shut off.

@Thomas Blocker Wanted to chime in with perspective here, as we have designed, permitted, and built ~100 ADUs in San Diego County.

As long as there is a good thesis as to why the demand will remain high for shorter stay rentals  and most importantly (1) the use is allowed, (2) the use requirements are protected by in place permitting and licensing and (3) the permissions are transferable through a sale you will be on the right side of the supply/ demand equation.

I know here in San Diego I had to have permits just to put air conditioning into my house. 

So, basically things like zoning issues, back utilities, permitting, etc. is what I'm hinting at.I realize all states are different.

While you're on the phone or interwebs with them ask about building permits, impact fees, and anything else that is required to be paid for building in on that lot or parcel.