- Liens, permitting issues, zoning issues, titling issues, etc?

Go to the city website, it should be very specific on how they calculate permit fees.  

We would live in the basement apartment, and rent out the upstairs.I'm just concerned about the apartment not technically being approved.Only the owner of record can request that the city permit the apartment, so I couldn't do anything about it until I own the property.What would you do?

The STR landscape changes frequently with many cities tightening restrictions but there are opportunities depending on what your looking for.La Quinta for example, has a 90 day moratorium on any new STR permits as they look into their STR and balancing recent neighborhood complaints due to the increase in demand for STR due to the pandemic.

Definitely a solid place to look but there are some rules to work with to get a permit and do it correctly. 

After zoning is approved you need permits, which requires architectural plans and various land surveys. 

Property was remodeled at some point without pulling a permit and now a 3/2.

If the headroom is that low (requirement is 6’8”) sounds like it was done without a permit.  

I know that in Indiana, buying cheap houses, demoing them, and building fresh is a solid strategy for flipping but having seen the list of permits required up there vs down here, I would advise to make sure that you have all your t's crossed and i's dotted. 

Now I am stuck without a loan, an appraisal that may not be accepted by another lender, and I am about to get full building permit and finished with grading permit.