My PM says they will watermark but I see others in this forum stating that doesn't really do any good because that somehow can be altered (?)

Not expensive unless you have uncooperative tenants living there.Zoning - Don't worry too much about the current zoning, focus on if the unit was at some point legal and hasn't been significantly altered since then.

Your lease likely has some sort of very general section about maintaining the property and not making alterations.

They have some sort of pricing matrix that alters interest rate based on the age of a car.

When you have a single unit where you are not insuring the common areas, your liability is limited compared to a single family home where I do not recommend less than $1MImprovements and Alterations is the coverage limit that covers all of the finishes in the unit. 

However, something to consider, a conventional lender will likely have issues with a property that was altered without proper permits and a revised certificate of occupancy.  

And (as a buyer) I'm not going to alter whatever inspections I think are needed (rationale or not) because the owner is living in the property.  

Another reason I am very passionate about getting going in RE, is that I deal with some very life altering (but not life threatening) health problems and I really want to be able to focus on getting better.

That's a duplex that has a non permitted / platted alteration.

Will it alter his tax bracket?