This tells me two things: Obtaining a variance will be more difficult because there are already policy considerations in place intended to reduce density & (2) There is clearly an over supply of rental units in this area otherwise the overlay would not exist. 

We need more supply to do that.

So, 400k - 500k sounds like lots of money but if you wanna operate in the 300k+ entry point it get can swallowed up quick.One strategy I'd try is to be a buyer at the auctions, win a bid on a good house, close on it in cash (you should be a great deal under market value) and then get into a delayed purchase bridge loan product which will cash you out a certain percentage of the purchase and supply the rehab funds. 

Do they pick up or will they require you to contract with a waste company that will supply a dumpster and handle pickup.- If you get a dumpster, neighbors dumping in your bin may be a problem, depending on the location.

We're currently looking for ways to streamline supplies for cleaners (toiletries, towels, item replacements) and handle small handyman issues.

I probably won't supply a mini-split but a portable heater is probably necessary.

In those two specific states there is just a ton of build-able lots especially SWF so you dont have a supply issue like other areas of the country that are supply constrained and therefore prices are holding or even rising a tad.

Actually buying these apartments and not the current supply is a good opportunity.

And tons of people are getting into this business and drive the price down (simple supply vs demand curve).

Senior Living here is in short supply and high demand - good luck!