In the olden days we used owner financing and even subject to financing when we were young and poor.

We lived in the country, across the street from Welkinweir.

Purchase price: $110,000 Cash invested: $150,000 This is our first deal as a full family (Parents, sister and brother in law, me).

It would be wise for a buyer to feel confident that the building is in good structural condition, that it has a certificate of occupancy.

I do not think options 1 and 2 are mutually exclusive, in fact I think you should do both. 

Quote from @Becky Donner: Hi, I am looking to expand my portfolio in Chicago by investing in two or three bedroom apartments and or multifamily.

most contracts your 5k is your liquidated damages in most contracts. .. so snag that fire the agent and find another buyer if 13k is that important to you.. for sure not worth hiring an attorney for. 

In many cases it is fully legal so long as it is your primary home and you occupy one of the units but definitely make sure you're in compliance before you move forward.

This tells me two things: Obtaining a variance will be more difficult because there are already policy considerations in place intended to reduce density & (2) There is clearly an over supply of rental units in this area otherwise the overlay would not exist. 

You could start by reaching out to any local corporations that do assisted living in your area and see what they are looking for (location, space specs, etc).