Mortgage Interest Deduction: You can deduct the interest paid on a mortgage used to buy, build, or improve your home.4.

I did a home improvement project where one of the perks was 0% for 2 years.

There's some complicated ways around it and things may have improved, but I can tell you that I was personally threatened with being charged with a felony in 2019 for renting my property even though I had gone through the proper permitting.

I feel this is not a best practice, but I'm not sure how to improve it.

However, if you are purchasing the property subject to the loan, which is an FHA loan used for primary residency, I don't see a title company working with that unless the loan is paid off prior to any improvments made to the property.

I can understand some things, such as new window, but are cosmetic improvements such as paint and power washing really necessary for Section 8 approval?

I would also say that while refinancing could improve cash flow, it's speculative, so you would want to ensure you have a solid strategy in place to manage the negative cash flow.

That improves my ROI and lowers my risk. 

As for whether one has to get quid pro quo in increased rent for improvements, there is also a factor of the quality and longevity of the tenants one gets with an upgraded apartment even when rents are limited by neighborhood competitive pressures. 

As the seller I would pay for the energy audit, do the analysis on the work to be done (cost vs savings) and then market the home with a prepackaged improvement contract that would meet lender guidelines (solar, EE windows, etc). 45 day close to allow for enough time to do loan and obtain permits, occupancy COE+2.