Second, you need to find out from the building department whether you will even be allowed to convert to a 3 family. 

I would first do the due diligence with the county recorder or the department in your county that keeps the records on the property.

Yes, you can deny renting an apartment based on the number of occupants.HUD has issued guidelines for this, just google "Occupacy standards - HUD".On this guidance, HUD says that "the Department believes that an occupancy policy of two persons in a bedroom, as a general rule, is reasonable under the Fair Housing Act."

@Jay Hinrichs As I related in Bigger Pockets Podcast #82, my first purchase was a house at auction from the highway department at a public auction. 

In fact if you a pulling permits you may get some leads at the building department.

Here is the text from the Indianapolis Department of Code Enforcement. 

But TAR's legal department is of the opinion (undoubtedly based on case law) that once you get the report emailed to you or handed to you, you can't claim ignorance of any defects noted in the report even if you refuse to open or otherwise review the report or even if you dispute that inspector's findings.

So to Recap I cal (not title company) neighborhood code and water department to check for issues.

Another search found these two:http://schillings.com/departments/kitchens/http://www.buildersupplyoutlet.com

I found one like this 10 years ago and found out that the foundation steel was never signed off so the contractor just stopped building rather than tear down and start over.Your first stop is to the county or city zoning / building department to check permits and code violations.