Again this is if you want to do is passively.In regards to markets I would recommend the southern/middle part of the country because the price points are much friendly as well as the laws.

@Tim Thompson  it could get tricky,  check your states laws on evicting victims of domestic violence.

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.

While it's something I think is not taken seriously enough by society and the law, it's just far to common amongst all classes of people.

Within minutes of uploading entire disclosure packet, it automatically detects various type of documents (home inspection, TDS, solar, roof, pest etc.) and creates an insightful report of safety risks, costly repairs.

You need to research/know the rules, laws and regulations (including HOA if applicable), like you'd do in any US city.

I sat in on a lot of the meetings with owners/city and it seems for the most part to me, the city is just not interesting in AirBnB and as an investor, that's not a good place to be or be right.There will always be probably a few people who skirt the law or think they have a good workaround, but often catch 22. 

This is why I stress the importance of knowing the laws and the strength of the legal system before investing in a particular market.

It sounds like you are not in compliance with those laws if you don't live nearby.

Just make sure you understand laws, zoning and you are eligible for lic.