Look at employers in the area - you want some diversity of employment so that if 1 company closes you don't lose a bunch of the population2.

Here are the details:Bought in 2015Owes - $45kNeeds additional $20-25k as a down payment on the new house for equity.Rate - 6.125% (Adjustable Rate Mortgage) Max is 8%PITI - roughly $700/monthHouse is in great condition so no rehabAsking $175,000, could sell on market for $220-230kRents - $1400-1600How would one structure this deal?

Additionally, these attract a lot of inexperienced buyers who started in the single family or four plex space who are trying to go bigger. 

Usually you can add additional support and fix this problem but I did run into one house where there was a single center support running through the middle of the house that was entirely rotted and the only way to get a new support of the appropriate length in would have been to take out a portion of the basement and first floor walls.

FINANCIAL CONTRIBUTIONS:1.1 Party 1 Responsibilities:Party 1 shall contribute to the partnership for the down payment, closing costs, and construction costs for renovations and additions.1.2 Party 2 Responsibilities:Party 2 shall independently pay the mortgage until both properties are rented, oversee construction and renovation, manage both rentals, and handle bookkeeping during construction.2.

In addition to considering what lenders opinions might be (currently Fannie and Freddie don't want to see any more than 10% of units being STRs but not sure about LTSs).

If you don't get any additional feedback, you should be able to call the City of Phoenix Planning Dept and assess the overall process, timeline, fees, and feasibility fairly easily.

Penalties:Misdemeanor of the first degree: This can result in a maximum imprisonment of one year and a fine of up to $1,000.Civil penalties: You may also face additional civil penalties depending on the specific circumstances.Permitting issues: Local permitting authorities might withhold final approval, revoke the permit, or pursue other actions against you, maybe not give you the CO. 

Exactly and all of that plays into the price you're willing to sell the additional frontage for to allow for the new lane.

Granted there are also additional financial burdens not reflected in the credit report.