What red flags do you see? 

The unit is zoned as a (C-1) commercial transitional zone.

The market has been red hot since I have moved here with little chance of things slowing down any time soon. 

They threw up enough red flags for us with empty promises and misinformation that the deal fell through and we lost the 6K. 

https://www.soundmultifamily.com/blog/thoughts-housing-shortage/There are multiple reasons why we havent been building enough in Washington... increased regulation is the one that could be controlled the most but isnt (about 25% of a builders budget is just getting thru the red tape).

Additionally, the property is zoned for mixed-use and can be commercial or residential.

Leave no stone unturned, even how to turn on the TV (press the red button that says power).

I'd like to think that I have a better understanding of what to look for or certain red flags to look for in the future. 

I went to the County Auditor website and saw that it is zoned as a 2-family and land use is also 2-family.

The best place to start is with the city planning and zoning to discuss the specific building you are considering and the requirements and zoning regulations you will need to consider for the intended use.