Essentially, they give you an idea of whether or not you’re equipped to handle this property or if you should move onto another that better suits your needs.However, there are a few possible exceptions: mainly condos and other living situations where the bulk of home maintenance is covered by an association.

He also thinks he can rent the shop out to a local woodworker (it's currently equipped for woodworking), or to a local mechanic/car detailing service for a few hundred each month.

I don't think parking my equipment next to my tennants sounds real smart.

My fear is something going south with this purchase and us not getting a loan in time and someone else buying the property before we can.The asking price for the home is 85k, needs possibly a new roof, HVAC, the pool is in bad shape needs new equipment, walls have holes punched, and windows all need to be repaired, this will be a full rehab.

I pay an additional $500 per year to cover my tools and equipment, and another $200 per year to cover a "non-owned vehicle" (so that if my employee is driving to make a repair and is on the clock and gets into an accident, I'm covered if the plaintiff's lawyer goes after my company).I'll have to double-check with my insurance agent about the cost implications of forming a new PM LLC, but I don't expect it to be thousands of dollars in additional liability coverage.

The lower unit is ADA equipped for a wheelchair user, and will require about 5-7K in repairs to convert it back to a non-disabled use apartment. 

Maybe in the expensive market it will be 10-20% more because of higher labor costs but the materials and equipment will be the same price or nearly the same price.

Great insight- I have heard that this can be a very thin line to walk...if I were to go ahead with this, I would most certainly use a designated room with strictly business equipment- to the extent that I would consider two offices, one for business, one for personal finances...Thanks again for the help!

The use of funds is totally irrelevant, the borrower could by a rental home, could by a paving machine, a load of equipment, it doesn't matter what the use of funds might be. 

My experience is with a company off Angie's list who arranged that way in their contract - buy all materials and charge a 20% fee as a way to make profit, "but don't worry we get contractor discounts in about that much so you're paying the same" (bs, they bought straight from Home Depot with no discounts, and btw what is that $100 saw on there and other equipment?).