Imagine if it cost 1000 to send out 50 letters but half of them responded and half of those wanted an offer and half of those accepted an offer and half of those closed and half of those resold for a net 50k. 

Is it common for developers to use subsidies to cover 100% of the construction costs without needing to obtaining debt or raising equity?

Id keep looking if it was not an approved short sale ( even an approved short sale takes a very very long time and theres no guarantee that you will even close on the house after months of waiting). q1)There are plenty of non traditional lenders that could offer you construction financing if the numbers make sense but it will cost you with points and a higher rate.

Just stating that waiting will also likely make the cost of what you want to buy go up if the last 98 years of real estate data provides the future direction.

So for the first property which will cost over $1 mil to construct, there will be stacked loans, essentially $280K will come from loan assistance program,( the name is not correct but the same idea).

Typically starting with a smaller rehab budget of $50K or less (maybe a max of $75K) and avoiding a 1 to 1(or higher) ratio of purchase to rehab costs is recommend when you are first starting out. 

Another note on construction cost, going vertical is very expensive now and would require have a great connect with a developer and a builder in the area.See what rents are in the area and run the numbers to ensure the rents will cover your costs and give you a solid return—using the 1% rule can help.

There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.2.

Sure don't do the renovation, I only do renovations that project a return of 2x the cost of the renovation.

Procrastination will only cost them more. yep. carrying costs alone, but also if its not your money and investor money - some will try and drag it out.