My flipping clients will often do that because the appraiser may not take it as a bedroom for financing purposes and buyers may see red flags if its an unpermitted bedroom.

We are looking for houses with larger lots and favorable zoning to utilize our owner occupied loans and subdivide and build while we work there.

Spoke to attorneys, way to many red flags.  

Red flags?

Following cashflow trends in emerging markets can allow you to meet your goals much quicker, even if that means getting a bit out of your comfort zone.

.- Insurability & Operations costs: Can be considerably lower (especially in comparison to CA) with most coastal regions there is much lower wildfire risk and the properties that are in flood zones, have surprisingly accessible and affordable policy costs.

We wouldn't have any plans to rent the garage conversion out long term, it's just mostly extra space for us.Or (in theory, if zoning/permits line up) can I convert the garage to a guest suite without the separate address/utilities?

You could do 'coming soon' and then start showing it once you close (and before it turns into a reno zone). 

Little things can make a big difference as far has how long a house stays on market: school district, lot size, age of the home, flood zones (avoid) etc. 4.

A construction zone is not really safe for newborns, infants, or toddlers.