But with turnkeys, the properties are already fully improved, so the only way to gain that equity is to buy in a strategic time in the market cycle.

First, see Sch-C vs Sch-E.Second, the appraisal is not performed based upon EITHER schedule.However, the GSI-Expense = projected NOI, times 0.37 is actual NOI and that has to cover the mortgage+interest, insurance and taxes.The high vacancy rate (1.00 - 0.37 = 0.63) is a killer and usually, you would take such a loss ONLY because you would be year long resident AND love the life style - - aka it's typically a bad 'investment' and you're making this choice for OTHER than financial gain.

- As a result of the seller not being able to rezone it as 3 unit MFH, did the seller (or you) have to take explicit measures to lock the 3rd unit out, by destroying strategic parts of the unit, or blocking any gas/water access to the unit?

Let the owner tell you their thoughts then strategically negotiate off of that. 

It will limit their choices to units that have been sitting vacant.  

For air conditioning in this scenario, you could install a ductless heat pump if there is sufficient demand.Regardless of your choice for heating system, you will get your best bang for your energy efficiency buck by improving the building envelope (air sealing, additional insulation), which may necessitate the addition of a ERV/HRV to maintain air quality in a tighter building ... but it may also allow you to use a smaller boiler/furnace to condition the building.

(see pictures below- the first picture is why we're replacing the current carpet, and the second picture is two bur bur choices and the other two samples of the recommended StainMaster-).

its complicated in Oregon.. you have minimum density requirements.. as in if you can't meet the minimum density you can't build at all.but I can see if someone has the choice of 24 units.. they just build 20.there are State bonds to pay for low income housing..

Many times, you may not be given the choice!

Since I have a full-time job already and was primarily getting the license to buy and sell my own property, Fairfax was the best choice for me and I have been happy there.