What are my guarantees?

So you might pay a little more to do it this way, but it could be a good way to go if you want to guarantee that you will not be stuck with the headache of a potentially underwater starter home in Dover when you decide to move on. 

There's no guarantee that you wouldn't get a fine if DOB gathers that the unit is actually occupied as an apartment, but it does happen that people who attempt to legalize existing illegal conditions before they are discovered by the city avoid a fine.

You can have a bad tenant, bad guarantee, bad location, bad access, bad sightlines, poorly structured lease, amortized TI with inflated starter rents, poor or no rental increases, etc.Tons of variables with NNN investing.

You may be not smelling it , because we tent not to smell our own odors, but if I come in to your house I guarantee you 100% there will be an unpleasant smell to it.

If you go the lender route, they'd most likely  be looking to you to personally guarantee the loan.  

With the assets you're describing, I can almost guarantee it won't be sustainable.

On the other hand a rental offers additional income (not guaranteed, of course). 

You have the most to lose here and there’s no guarantee he will even finish the projects, which leaves your assets vulnerable.

@Brandon Tobalski there is nothing like meeting real live investors and I guarantee there are lots right around you.