We let them know we require this for the safety and security of the owners property.

This is fire/safety code and required.

An overlay is their internal credit risk “safety net” that they impose on top of the product.

All modern furnaces have more repairs because of the complexity involved in safety and efficiency.I have proactively replaced 40 year old HVAC systems, because it always seems they go out in the cold of winter or heat of summer - at the worst time! 

The only other things that can be reimbursed besides purchase price and taxes are things that are a safety issue (ie capping an open well so no one falls in).  

If you used that for the residence you live in now you could likely refinance that to a conventional loan possibly pulling out some funds for repairs, safety net, or another deal and then get a new VA loan for an owner occupied house hack.

Like a fire safety inspection or landlord registration or CO inspection?

The stair railing absolutely needs fixed as it would be a safety issue.

Have heard neighborhoods on the north side of town are the best areas to comfortably live doing this (safety)..

Key features of Denver’s short-term rental laws, rules, and regulations include:All short-term rentals must have a license.Any short-term rental must be the host’s primary residence.All advertisements must display the host’s business license number.All short-term rental hosts must follow rules related to safety, taxes, zoning, and insurance.Hosts who do not follow the rules could be fined, or could lose their license.It sure seems like you’d be risking your primary home and it’s equity on a speculation play.