The appraised equity rarely materializes on a sale in these markets but the appraisals offer false impressions of the "asset" that was acquired.

Is this roofline encroachment issue customary in this market? 

What is the flooring material?

Quote from @David Martoyan: There are many, they need to be market specific..

However, note that STR income may be considered active if you materially participate (e.g., managing bookings or tenant interactions), which could subject it to self-employment tax.This post does not create a CPA-Client relationship.

At a minimum, having viable plans in place for development will make these lots more marketable and valuable to potential builders when we have conversations. 

Bought a place a few months ago on market while doing a 1031 exchange..

That's where the real negative effect on the market will be.

It's a way for them to maintain control over their material and keep their audience intimate. 

To qualify, both spouses must materially participate in the business, and the venture must be jointly owned and operated.