One other wrinkle, if the appraiser sees that it is a working 5 unit property, they will note that and might raise red flags.  

What is the zoning?

The house is located in both a historic district (Mills Act) as well as an opportunity zone allowing for large property tax rebates and the elimination of capital gains tax when we sell.

The house is located in both a historic district (Mills Act) as well as an opportunity zone allowing for large property tax rebates and the elimination of capital gains tax when we sell.

There is so much red tape from permits, codes, zoning, engineering, environmental approval, etc.I wonder if it is by design or if our delegates are living in a bubble.

The are several that may not be on your area that will deliver to your job that not require all that red tape. 

-Will zoning allow what you're trying to do?

Alternatively, I can put up a NNN dollar store with the current zoning; allowed by zoning, but terrible as part of the city's master plan given this projects location relative to their quaint downtown area. 

Zoning dept told me the house we wanted to convert into a duplex, is zoned as R-4, and we cannot separate floors.

There's a property zoned as a duplex in a two-family zone, but it's a triplex.