Many sources, including my LOLO Landlord book, state that you have liability if you discover illegal activities and do nothing about it or you knowingly put an illegal operation there. 

They are a great source of education.

Currently in process of closing on a year and half long short sale proceeding where assistance is needed in locating funding source to provide financials for 31 day period in between A --> B and thereafter --> C closing.Arms Length Affidavit permits for listing to be transferred prior to 30 days and need lien loan provided for duration of ALA.Any/All referrals will be very much appreciated

They will become a valuable source to you and your investments.  

A qualified intermediary alone should never serve as your sole guide.  

PITI plus an additional loan could make this a bad deal ..demanding to interest rate from the down payment source. 

Unlike a typical flip, as you mentioned, you will have tax advantages as well as subsidizing a place to stay; additionally, you may be able to use an FHA 203k loan which may likely be the best source of funding.

Since no one has chimed in you 1st need to fine out if they are allowed in the area you want and then your best source of info is your competition.  

IMO one of the best sources is Realty Trac. 

Don't try to gauge solely by one company's or agent's lack of supply.What type of property are you looking for?