Begin with the flaming desire to be of service to this homeowner.

Once I got my license and had living reserves, I quit my job and went out on my own. 7.) learned the market I was in by learning about the rental market and was able to determine what was desirable and what wasn't 8.)

This is not to say that the zip codes you mentioned don't have demand for lots.  78207 is seeing more infill development than the other two zip codes, and 78228 is becoming more and more desirable, especially if they are larger lots.  

Should I stay away because it's less desirable than and SFR?

Next up would be zoning and whether your individuals or groups in your locale will throw a fit regarding your desired development plans.

Non-distressed homeowners have been sitting on their homes, even though they had a desire to sell, to wait for market recovery.

Even if it costs some money I think it is an excellent learning experience.Assuming I desired to go through with this project would you contact banks/HML's before placing an offer or after?

I guess basic curiosity and the desire to learn from others inspired me to lock for a forum with the type of information needed to take this adventure.

I have no desire to enter a lawsuit. 

I am trying to figure out what is more desired and which would have a better resale and rent value... either a walk in shower or a shower tub combo?