That being said, I have heard good and bad things about the 203k FHA, some saying that it is great because you can factor all of your repairs into the loan and pay down only 3.5% of that total cost, but others saying it can be a nightmare with a lot of setbacks dealing with contractors and other things.

In this obscenely smothering regulatory climate, I know it sounds like a loophole of some sort, but it’s not.

However, today I experience my first setback...

If the addition does not meet the zoning laws for the area then it is normal to be denied the application and have to go before the land use/ zoning board for a variance.you may not meet set backs,Impervious coverage, building coverage, Building height or the property is not zoned for the use.you will find that is really the 5 main reasons a permit is denied and has to go before zoning. there you can state your case on what you would like to do and if approved, move forward with the project after the building department reviews it.

Since they are processing the transaction, they have a regulatory and compliance obligation to actually look at all the documents to ensure that they can document what is being transacted.  

I'm looking for my first opportunity (I just got my RE license last week) to get into investing so its good to see that if you get through the setbacks you can learn a ton and be successful!

The RE owned is assessed as any similar property, the business side should be valued on its own merits, NOI, potential market, liabilities and tax as well as regulatory issues like the city health department.If you want a hands off business I'd say rentals....

Yes, I am using an agent and working on networking with other investors in the area to learn more about the specific market and their successes and setbacks. 

Although this education is almost 100% focused on legal requirements and regulatory agencies. 

Zero regulation now might lead to oversupply with no barriers to entry and then could swiftly change to a super difficult regulatory environment whereby STR becomes undesirable.