Transaction costs, seasoning, pre-payment penalties, DTI impacts, minimum lending requirements (more than 50-60k), and a long list of other issues make this a bad strategy.Buy 1 and see how it goes.

Has anyone had these issues and needed to change their GC?

Once you account for those fees, you're right back at the 10-12% average.Biggest hidden fees are related to maintenance.

Spoke w/ some Invester-friendly relators there and they both seemed to say "Its very hard to get cashflow-positive property now and you can expect appreciation of 2-5%."

I'm dealing with one now, example of issue: They want hand rails going down to the basement from the outside cellar doors.

Potential for tenant issues and vacancies.

Some things that might be a concern:1) Obviously have to make sure things are all permitted first2) I don't want the room to "feel" like an addition, so flooring has to be same level/standardized with the rest of the house3) Unlike the rest of the house that has an identically-shaped 2200sqft basement underneath, this added space will not have a basement directly underneath it -- I'm not sure if this poses major cons for some reason that I'm not aware of4) Especially given the lack of basement underneath, I have to make sure that the HVAC can still somehow be piped into this room#2 and #3 are probably my biggest concerns (#1 and #4 I can find out relatively easily)Any tips/thoughts or other experience would be greatly appreciated. 

Bergen County has mostly sf homes and the towns I work in seem to have low inventory in multifamily, making the 2 and 3 unit properties relatively more costly. 

It counts the same, legally, as if you built a fort on the land and put armed guards in the fort to keep intruders off.Possession and ejectment issues are beyond my ability to explain in just this post, because it takes too long. 

They finally signed, so the issue was resolved, but thank you for your reply Ray.