@Marc Robinson what's the lot rent, who pays what utilities and what's the source of the water and sewer?

I've seen VA loans close with backend DTI ratios in the 60s and low 70s.VA loans can be used for multifamily purchases with 0% down as long as the veteran will live in one of the units.

He installed doors on the living room to turn it into an extra bedroom.

Agree $800 seems overrpriced for a room, especially since it seems like he is acting as a live in nanny, the lawyer seems out of touch. 

I assume you are mostly looking for leaks and water damage?

If you're talking about building an interior wall to create a bedroom, this could work so long as you aren't significantly reducing living space compared to the competitive rentals. 3 bedrooms with a tiny living area could cause problems.

My rental condo in Asheville, NC was spared damage from the flood, but when the city finally turned the water back on a few days ago, they somehow overpressurized and blew out a fitting inside a wall. 

They instead use conventional conforming loans with low down payments meant for primary residences to purchase properties ready to live in!

I'm in the greater Boston area and I wasn't able to fully live for free but I was spending about $700 on my unit.

If you live in Cleveland (a cash-flowing market), I wouldn't look OOS at another pretty similar market.