Adding a third bedroom should get you more rent than a simple laundry room and I doubt you would need to pull any permits since the bath is already there. 

If all is disclosed to all parties I doubt there would be a problem. 

I'm placing backup offers but doubt they'll get anywhere.  

"Wear-and-tear" is a part of the rental business and one reason for collecting a security deposit, but if there is a kitchen fire, it is doubtful that the deposit will cover those repairs.One idea to encourage tenants to purchase insurance... 

It is not close to being gentrified yet but there is little doubt in my mind it will be eventually. 

I do agree there are some hot areas of HOUSTON  no doubt, but there are other areas that I have investors buying as much as they can because people are out bidding each other in one spot and taking their eye off the proverbial ball.You make money I feel 5 ways in real estate (as a disclaimer I have messed up personally buying wrong in each of these categories at one point in my investing career):-)...1.

I have doubts and fears on REI wholesaling, to be honest, but in long term, I have made more than IT income since 2011, just not monthly cash flow.  

It sounds like you understand the risks and benefits relating to the different buy and hold strategies, and I highly doubt the two townhouses you've found could be bad investments.

Mr B has been paying the taxes he says (I would need to verify this for myself).Like I mentioned, $800 is due to Mr B by this Wednesday so due to the short time frame I highly doubt I can even make this deal happen "IF" it is legal because I would want to get a lawyer to make sure my interest is protected. 

I'm not doubting that but I have talked to several attorneys concerning L/Os and none ever mentioned this.