But, Brian, I can arrange a very special deal just for you.

Not so much looking for a high-end remodel but something resembling your avg. apartment look and feel. 

We will do phone interviews and answer questions about the property and arrange to show it when it is ready.  

But assuming they DO NOT challenge..My question is - could the State of TX or other jurisdiction act independently of this harmonious arrangement and file their own lawsuit against me (the investor/seller), if they found something deficient in the contract?

See your attorney.If you are not required to have a contractor's license, yes, there are some places you don't, use a construction agreement and option.Having a contractor you can work with can swing the deal too.A JV can be done, more involved, but that's good too if needed.Can't charge a commission on a property you own without a license, just work all the profit in the price.These arrangements can get cross ways quickly if you have construction licensing requirements, even doing a purchase with a re-purchase agreement, it can be seen as contracting for repairs, so check that angle locally.

So I just listened to all the instructional videos that gave specifics details about navigation and usability of the page.In short, I think I got a collective total of 25 leads on Zillow and Craigslist and they all told me the were disinterested in a lease option arrangement.

I do one year leases, many others do month to month, depends on the market.The question is, how is this a mutually beneficial arrangement?

Also when you were acting as a live in landlord did you create a lease for your friend/roommate or was it more of an informal arrangement?

Insurance assignments can be changed after the deal is done, a seller can terminate an insurance assignment or co-insured arrangement, this can happen as attorneys are not on the same page, after the fact the note holder's attorney may suggest stop doing such insurance arrangements, those who require the buyer to obtain their own coverage, others go with an assignment of loss proceeds.

@Peter MacKercher Rent going towards a credit of either option fee or down payment is a "financing arrangement", as per SAFE Act and Dodd Frank.Be wary of giving such advice.Bill Gulley