There are tons of ways to do things effectively and legally that don't conform to ONE agent's opinion.  

Partner and I would live in basement with our own bathroom (non-conforming room).

."  :-)As far as the City goes assuming that this park is non-conforming then the city will have a hard time shutting it down if the owner is willing to fight.  

Those deals, in my market, are very, very hard  to find (a few years ago deals with no real out of pocket cash were fairly common).You need to figure out how you are going to finance the properties, if you have fewer than 10 mortgages, most people prefer to use conforming mortgages, after you get past 4 conventional mortgages the rules for pulling cash out get very tricky,, so talk to your mortgage broker (buying for cash and financing them to pull your cash out in less than 6 months is one way to do it).If your using commercial financing you don't have that hassle, but your paying higher rates with a shorter lock on the ratesandy

Conforming residential loans are only "warm blooded citizens" as legal entities, such as LLC's, are not eligible. 

The Seller applied with the town for a Certificate of Non-Conformance so that the second house will be legally rent-able.

I would 1st focus on building your rental properties, max out your 10 conforming loans.

But obviously the rules are built to try and stop you from doing exactly what you are thinking so the easiest is to refinance the first FHA loan out to a conforming loan. 

You'll need to be able to qual for conventionals, or perhaps non-conforming loans. 

My guess is the loan is conforming to Fannie Mae and Freddie Mac underwriting standards.