@Kyle SmithThere will be an option on your 2018 tax return that will allow you to defer the gain if you put it into a qualified opportunity fund.I am not sure why you would need to extend the return if you already sold your capital asset.

As they're demoing the roof (and making a HUGE mess around the property, tar and gravel roof+ pine needles being thrown around the yard with no tarps), he comes back and tells me that spacing between the decking is too far apart compared to code, and it's going to be an extra $3,500 to redeck the entire roof (could have told me this when he gave me the initial quote, wasn't hard to see that).

I will take your offer and will invite you for a coffee or such once I returned to Prague after the holidays. 

Of course there will be an in-depth check of all documents and bank statements or tax returns for the property.

For an owner occupied though, I’m not sure since an “entity” can not be an owner occupied. 

I will buy coffee!

The seller is wiling to negotiate the sales price knowing that this will be an issue with any buyer using bank financing and affects the value as an investment.

It's unfortunate that some investors think that their relationship with their contractor needs to be an adversarial one.  

Call some rental signs and ask the owner if you can buy them a coffee. 

If a "few" years means 10 years, this would be an investment that I shouldn't have made in the first place (i.e. the IRR is far below my RROR comfort level).Note:- Cap rate is irrelevant in this case, if this property is a true multifamily then cap rate can be used to estimate your exit price, but you already know it (i.e. 200k).