I'm not advocating buying or selling real estate just to exploit this (or any) tax loophole.

Don't buy, if the only way you can make the numbers work is by exploiting the tenant.

Most do not want to put in the amount of hard work and patience needed to succeed and I guess some of these programs just exploit that. 

From my understanding, the rule is in place so that consumers do not exploit the financing opportunities FHA provides.  

And YES, there are these people out there, litigious people who look for opportunities to exploit their protected class for financial gain.For the record (and to avoid some of the BP posters who love to argue a cause, no matter how irrelevant to the topic at hand), I am not taking a position one way or another. 

Any loopholes that can be exploited to remove some of the red tape on back yard improvements?

When we enter the real recession next year or 2021, all of them will disappear from the market and only those with integrity and education will remain.So my advice to the author of this thread would be to do business with the goal of helping the seller and fixing the problem rather than exploiting the bad situation.

Our country was founded on the exploitation of slaves for capital gain, so the sentiment throughout this thread does not surprise me.

If someone finds an exploit it is fixed promptly because everyone knows about it and is working to fix it asap because they are suffering from that same exploit3.

Any perceived weakness in the rules is quickly exploited by people who are only here for self promotion.