My main concern is whether it's hard to meet their criteria for properties and secure funding.

I understand your concerns.

Unfortunately, I tend to agree that they really are not concerned with whether or not you have to cancel bookings. 

My concern is whether the city could deny permits for these modifications, such as removing walls or converting a garage, or if they are mainly just concerned with safety and habitability.

Though the property and surrounding areas look nice in the pictures, the doors and windows has bars which concern me.I am just starting our my RE investment journey and all help is greatly appreciated.

Why I am leery of these "creative" things for people with little to no money One of the concerns of going to fast is over extending beyond their resources. 

And the planning workbook that accompanies it.

My concern with the home equity loan strategy is I'd still have the first home mortgage, the equity loan, and a new mortgage (albeit reduced from the down payment).

The current owner is usually not be very inclined to give the news to the tenant out of concern that the deal does not close and they have to deal with the vacancy.

When you see what people do with old space heaters, guards and safety removed, plugging in several in one overloaded extension cors,... you can see where the concern is coming from.