Usually retail on the ground floor and residential up top.

I don't think the fact that prices have gone up 5 years in a row is a good clean indicator that they will continue to do so, if it cashflows today and I can hold it for 20 years inflation should do most of the heavy lifting for me. 

If you warned them and they didn't clean things up that could be a reason. 10.

Don’t know much about Memphis as a city itself though, I just know crime was a problem back in the day, is that still the case or is the city getting cleaned up and growing?

I would assume the purchase contract has a clause that states title is clean and there no encroachments.

Like the push to get tiny houses accepted and zoning changed,   a "cleanly well run rooming house" business model has yet to get much muninicipal acceptance tracktion.  

@Michael Palmer As a general rule of thumb bank originated construction debt will be WSJ Prime +1 point with a floor, 1 point origination and 75-80% LTC while meeting certain LTV thresholds (normally 70-75%).

OP said: It’s frustrating, especially because our due diligence came back clean, leases were solid, and the property had just been fully renovated.

That would be a foundation issue to make sure the current foundation is able to hold two more floors on top and also a height issue for the town for the area.

But it's a 3/2 and I think I could rent it for $1000-1200, has a lot of NEW things already in it (AC/heating, kitchen cabinets, appliances, flooring) but bedrooms need to be finished remodeling.