It may be worth trying that first, even if it doesn't work those items need done anyway. 

Stop issuing 1099-MISC with box 7 "non-employee compensation" instead of box 1 "rent"Stop including refundable deposits in rent incomeProvide annual reports clearly delineated by propertyLearn the difference between maintenance, repairs and improvements and report accordinglyReport insurance reimbursements separatelyProvide supporting documentation: itemized contractor's invoices, insurance adjusters' reports etc

The answers to those questions should tell us how we need to treat the loan interest.If taxpayer just throws it in a bank account, the regs are pretty clear it is investment interest, which as you well know is itemized and limited to investment income.In a nutshell, we need to trace the cash.Treas Reg §1.163-8T(a)(3) Manner of allocationIn general, interest expense on a debt is allocated in the same manner as the debt to which such interest expense relates is allocated.

Is there a recommended book out there that does a good deep dive into proper due diligence and other important items like determining reserves?  

If anyone here could offer advise about these items I would greatly appreciate it!  

Increasing bathrooms, refinishing whole house woodwork, updating all mechanical items, and adding those modern touches throughout.

If you deal is this strong, you should have no issues negotiating these items or getting the third party reports and going to another lender.

I haven’t heard about how CMHC rules intertwine with the pot regulation..... another item to our due diligence todo list.

Landlord home owner insurance usually covers the property itself, not the tenant's belonging.The tenants need to have their own renter's insurance to cover loss of their items like personal clothing, electronics, furniture, etc.

FHA, VA, and Conventional mortgages each come with their own set of rules and requirements or the condition of items such as the roof, plumbing, appliances, peeling paint, floor coverings, etc.