My primary concern is the changing nature of renting a unit in a building whose units are being converted to day rentals, comparable to Airbnb.

Now converting to rental for a positive cash flow of $1500/mn, continuing to build portfolio, and developing land home sits on (zoned for 40 units).  

Some numbers for your perusal:Purchase price: 70kLand value plus shop 35kMoney this house could easily eat before all is said and done in fixing it $70KValue if we poured $70K into this house  $120-130K todayValue as-is  $55KRent the house could fetch if we dropped $5K into it  $800/moExisting mortgage $622/month pitiCould refinance to a piti of $500/monthI ran a scenario where, if I dropped $10k to stabilize the condition of the house and $25k to convert the garage to a studio apartment (rent for $300), it would be around 10 years before I could break even.Thanks for any advice or insight you can offer as you play the what-if game with me.

I feel like I've heard that after a certain period of time you can convert it to a rental and buy a new FHA insured property. 3 yrs maybe??

Basically we are wanting to take an old building and convert it to a few apartments or townhouse/condos or even to start small and just convert to a single dwelling.  

@Russell Brazil - Thanks for your honesty, I think I almost fell into that trap and glad I avoided it, just by an inch too!

option of converting to gas is there in the area.. 

I feel like if I at least converted the electric to two separate utilities, I'd be good.

If you give an inch thinking they will repay you for it they will just take a mile.

This was effectively a 6% risk free interest rate arbitrage thats been running for close to five years now.now I'm in graduate school and get them at 6% (interest accrues immediately), I've used it for remodels and down payments. when your done with school, you can opt for the balance to convert to a 30-year Amort.