I notice you skip right over who does the clean up, Jim, and who has to approve building in areas that aren’t defensible.I also see that now you admit that your fairy-dust belief that people “will” work with insurance companies to clean up is not necessarily true.

I hired an IRA-approved valuation company to value that note at that time.

You can provide a loan modification approved by the bank to be accomplished immediately upon the purchase of the note, this, along with the waiver and request for the sale by the borrower takes the bank's liability away selling a note to a non-banking/mortgage broker type buyer.

They said it needs approval from city.we appreciate your thought! 

Or you can try and lease option it, but be sure to mentor your tenant all the way to get pre-approved, otherwise you have an 80% chnace they won't be able to buy it. 

He has suggested an 8-unit building.10,000 sq/ft @ $215 sq/ft = around $2.15MEach unit will be worth around $268,750The current plot of land is currently zoned for a duplex without further approval from the city/community, but the zoning on the land can allow for up to 8 units by applying for a Special Use Permit through the city.

I'm wondering, is this not a major problem for landlords if no further applicants are getting approved for vouchers?

If they approve it, you can do it.

Should I just completely ignore the FHA loan and try to get approval with a smaller down payment?

The article quotes: "The DHC regularly takes many months to initiate payments or approve rent increases and rarely responds to landlords’ messages."