many cities now encourage ADUs  Portlandia for one.. they look at it as a form of affordable housing and of course PDX is all about cramming people into density and now So cal sprawl.I have 3 homes I am building this summer all three will have ADU's above the garage with full kitchenwhen I told the planner at the city I have alley access and I want to put ADU above detached garage you could just see her light up.. its planner nirvana..

My go forward strategy is take these homes that are in good condition, maybe even lightly renovate them and turn them into standard rentals, on the older ones there still may be resale or scrap value I'll take that on a case by case basis and then begin to Vet incoming tenants and establish a "housing code" so to speak going forward on appearance...this will be a multi year strategy as I can't just kick the old homes out and find great new tenants over night but I'm confident over 5 years I will greatly improve the appearance and there for the rent value

It would probably never come to light and will probably not be a problem for you, but it is there.Why not just charge him full rent, pay him a comparable fee for his services and deduct the fee as an expense, and you are in the same place.  

All I can do, in light of the Fair Housing Act, is point clients to some public resources to aid them in researching it themselves.Am I wrong here?

I would make the building stand out with lighting, facade and landscaping.  

Bob is also likely going to jail if/when it comes to light that there was an outstanding obligation on the property, because failing to disclose is fraud. 

Purchasing, doing light rehab, advertising and getting three new tenants at 15-20% higher rents in just a few short weeks seems super aggressive.

Light to moderate smoke damage to walls/ceilings can many times be sealed over and painted, but of course it all depends on the extent of it and the amount of time and condition of the environment since the fire.  

There can be so many variations and reasons...I am a newbie so other posts are experienced and more accurate with their warnings...set your limits and stick to it for your own personal sanity...and safety...!

I'm sure that some of the comps that they pull will have old 16 year original materials, fixtures, flooring, paint, plumbing, lighting, etc.