Here is some basic information for mortgagors: Texas Property Code Section 51 covers foreclosure law.

The only way you can operate one legally is in specific zoning codes that allow for such a thing. 

Negotiated with the bank, city code infractions, and owner to purchase the property.

Numbers look good but like @Matt Moreland said there will no doubt be some expenses to get the property up to code.

NEIGHBORHOOD, AREA AND PROPERTY CONDITIONS: Neighborhood or area conditions, including Agricultural Use Restrictions pursuant to the Williamson Act (Government Code §§51200-51295), Right To Farm Laws (Civil Code §3482.5 and §3482.6),schools, proximity and adequacy of law enforcement, crime statistics, the proximity of registered felons or offenders, fire protection, other government services, availability, adequacy and cost of any speed-wired, wireless internet connections or other telecommunications or other technology services and installations, proximity to commercial, industrial or agricultural activities, existing and proposed transportation, construction and development that may affect noise, view, or traffic, airport noise, noise or odor from any source, abandoned mining operations on the Property, wild and domestic animals, other nuisances, hazards, or circumstances, protected species, wetland properties, botanical diseases, historic or other governmentally protected sites or improvements, cemeteries, facilities and condition of common areas of common interest subdivisions, and possible lack of compliance with any governing documents or Homeowners' Association requirements, conditions and influences of significance to certain cultures and/or religions, and personal needs,requirements and preferences of Buyer.Things I'd suggest including is investigation of services and feasibility of connection to public services specifically.

Does it have a small kitchen, in a flood zone, septic system, plastic CPCV plumbing, tree growing through gas line, modular home, foundation repair, auction listing, property code violations, past due taxes, murder or method house history, pit bull next door, corner house, finished and leaking basement?

Searching Craigslist for FSBO's, - Most of these are usually wholesalers from my experience, but once in a while you find a deal on there, and it doesn't take long to search them, especially since you can sort by zip code radius, price range, etc.4.

From what I've seen, doesn't look like my municipality has short term rental restrictions or occupancy laws in their code, but not sure where to look in the ordinances for this or what it's referred to. 

I have a deadbolt with a code on owners closet.

These are professionals with additional training and a stricter code of ethics.