Like you, I also love the design aspect and wide variety of potential renters this type of strategy works for. 

This type of investment can actually be easier than you think.

Not sure how they'd actually track that type of activity though regardless.

I think you're reading too much into the agency types here.

Quote from @David Neubauer: Hi all, Over the past year I have been gathering knowledge on various different types of real estate investing.

The OP asked specifically about functional homes not in the flood zone and historical data shows that this type of property usually goes up in value after a hurricane. 

For a bathroom or kitchen type remodel scope I will side with you, 1/3 wouldn't present any red flags but not for a more substantial renovation scope and certainly not as a general rule of thumb for all construction projects.

If you are trying to get others to pay your down payment and you have nothing in the deal, there are probably no terms that anyone would agree to unless they were getting credit card type returns. 

@Jefferson BlackWhat is the turnover on this type of property?

It is my firm belief that there is a market for every type of layout in the mid term space, especially when you're located in a major city like Chicago.