. - What exactly is the red tape you are trying to avoid? 

The property is a duplex with an ARV (after repair value) of $700,000, making it a strong deal.However, I want to ensure I’m not overlooking any potential red flags.

I wasn't sure if asking my FHA lender about switching it to commercial will raise red flags.

One of the biggest red flags I have as a lender (who lends my own money as well as secondary market loan) is when a rookie tells me there goal is to buy 10, 20, whatever properties in the next year. my next question is how many do you own currently?

I know, there are plenty of red flags there, but I do believe it is worth the risk when I consider how happy it makes my wife, how life-changing it will be for the family, how minor the financial impact will be on me, and how it gives me the opportunity to practice the steps of real estate investing with forgiving tenants.Finally, I am going to attempt to self manage as nothing comes close to cash-flowing if you include PM costs.

Housing shortages have more to do with boomers living longer and holding on to their large homes and provincial red tape.

I hope you were able to catch some reds and sea trout in the bay.  

On the other hand if they are a sponsor that is experienced in stopping a skin in the game, that's a huge red flag for me.c) how open to scrutiny are they?

People probably do this all the time, but skirting the law and subject to red tag if the city finds out. 

Every interaction with them has raised red flags.