Even if it takes ten years to complete the flip, the acquisition date is always in the same year as the sale.Consult a licensed tax professional for specific guidance as it may relate to your unique circumstances.  

A much shorter holding period has been accepted, where a change in circumstances indicates that the taxpayer had intended to hold the property for a longer period.

Yes, you'd be taking way less than you would/should under regular circumstances but it could payoff dividends in the future.

Universal practice OR depends on circumstances?

Even if there was a way to rent out an 'illegal' apartment, I absolutely under no circumstance would with the strong pro-tenant laws Massachusetts has. 

Lender won't want to hear excuses about weather or other circumstances,,,,, so ensure you take into account everything that could effect your performance.

Advertising at $3000/mo. would likely open you up to some neglect, in making it harder to get a tenant, than at the current tenant's rate.

Outside of those circumstances, I do not specifically recommend college, especially if it involves going into debt. 

We have a unique situation with our family business where we have had some tough personal circumstances that have impacted our business this year.

$1.3M value property needing $150K repair is not going to be sold for $500K unless there is a VERY unusual circumstance; and then it will be sold to someone with the cash to close immediately.