It has been legal with the city of Sedro Wolley (I called to confirm) and it status is legal non-conforming (since it was built before the new zoning changes).

On the other, I really don't want to put myself in a situation where I have 5 or more properties and everyone stops paying rent at once, and I'm unable to sell because the market has crashed.I guess I just need to run some numbers and determine some worst-case scenario situations and to what degree I'd be able to ride them out given my current hypothetical financial status.

How can I submit an offer for a rehab house when I don’t know how much the rehab will cost me to see if I will make any profits? By the time I get contractors to get the estimates the property is long gone! Submitting...

Actually, I'm having a tough time figuring out Florida's status, @Wayne Brooks. 

Also, if you go for an REO apt, first try to find out what’s the HOA status of that property, even thought there’s certain state laws that will protect you, HOA will give you hell to try to get there money and you ll have a very complicated flip on your hands... cheers!

I had all different types of section 8 tenants, some were great and some were not so great.I will not sweat too much over current lease status but ask seller that you get renewed lease during your due diligence prior to closing.Good luck.

He said he didn't know if it was in foreclosure or even what the status was.  

Its good to run their credit, see their total monthly income is no more than 1/3 of the rent, also ask for references from past landlord, also ask for a ledger from the landlord(now some might not keep one, but basically it is a report of when they paid their rent and any additional charges such as late fees and deductions from security deposit ) Don't forget "Property owners and managers are subject to the federal Fair Housing Act, which prohibits "any preference, limitation, or discrimination because of race, color, religion, sex, handicap, familial status, or national origin, or intention to make such preference, limitation or discrimination."

I would politely follow up each day to see the status. 

Imagine you overbid another person on a house by 150K and then you read an article that based on "sex, age, veterans status, religion, race..." this other person was "a better fit" for the neighborhood.