That neighborhood is buzzing with potential-young professionals, trendy developments, and a rental market that’s always in demand.

Is it overkill for a potential non-problem?

It is tough to crack, but it has so much potential. 

Did they discover something that was going to potentially cost more than they thought?

Over 1 month with 124 Zillow potential tenant contacts, the property manager report showed no leads from Zillow and couldn't find tenants.

If this happens, new people won’t be able to get vouchers, and landlords may have fewer potential tenants to rent to.

He didn't have much downside in terms of potential losses, and I could be somewhat passive and protected legally (he owned the building site etc. and took care of liability). 

Because you sign a lease with a poorly written clause, you still have to abide by it, and trying to get out of a legal lease will cost you at least your deposit...if not potentially more. 

Quote from @Preet Sekhon: Just wanted to flag something potentially impactful for real estate investors: it looks like 100% bonus depreciation might be making a comeback next year.

Also if it is intended to possibly be a rental you should calculate the end result of the acquisition, the debt service, the rehab, etc and pretend to get a loan to refinance. then look at the potential rent to offset that monthly cost and see if it would cash flow.