All the "but... but... but..."'s

With a low 4.75% rate but minimal cash flow ($50–$125/month), your equity could likely work harder elsewhere.

HUD 4000.1 (I believe) is the latest HUD handbook and it goes over all requirements for originating the loan, including but not limited to occupancy requirements and exemptions.FHA occupancy : "At least one Borrower must occupy the Property within 60 Days of signing the security instrument and intend to continue occupancy for at least one year."

My initial thought is that the developers may have gotten a much better deal than they would have otherwise given the clear limitations on the land's use.

The court of litigations may have its limitations but the court of public opinion is free and limitless.

While formerly the limited partnership organizational structure was used, its now mostly an LLC structure being utilized.  

Short term, leaving financing in place during rehab prior to resale — great strategy with limited risk to either party. 

One or two maybe but everything.

Also one thing to benefit this model is you have an LLC the limited partner can take most if not all the depreciation and you take little or none..

For deals I do, I try to write in under the inspection section in the purchase agreement, “any and all recommend by home inspector including but not limited to inspections checked no above.”