I will be investigating this further on my own of course.Here are some pictures, one of an overhead view of the open part of my lot highlighted in green & the neighbors "backyard buildings" circled in red, two others of my neighbors houses where you can see their 4-5 unit buildings in the back yard (also circled in red):- Can anyone give me a brief overview of what this type of project would look like in terms of time and capital?

Be sure to investigate what you have for insulation and where (old houses often have walls that are only insulated part way up, due to settling of the original insulation material).

Exactly.So if you see a bunch of empty calendars within 69 days out, this is a huge red flag that requires further investigation. 

I am in the preliminary process of researching the idea and wanted to get some initial guidance on where to start.

First, I investigate the cities - population, jobs, crime, avg income, avg rent on http://www.city-data.com and http://www.Wikipedia.com. 

Spent several weeks investigating, then not only invested in a deal in Dallas, but I went on to raising capital for syndicators, became SEC registered (some hard tests involved), and could pretty much shout about syndications from the rooftops to anyone who will listen.

My friend who is half owner of the LLC says he wants to investigate selling the LLC instead of just the property. 

I will have to investigate owner financing.

I work for the government, so it really doesn't matter as long as I disclose everything during the background investigation process.

Because it is so close, I would proceed in preliminary planning only looking into if any of these new rules benefit your effort.