Unfortunately most lack the balance sheet to obtain favorable financing, can't afford to put any skin in the game and fail to make a compelling reason for why the investment makes sense or to justify the structure they are seeking.

The diligence varies by county, but my experience has been that they check very thoroughly.

Sec 8 opinions will vary.

Here's a post where I go into detail about DSCR loans as far as the importance of cash flow, credit scores and down payments: https://www.biggerpockets.com/forums/49/topics/1080147-refinance-rate-105Lender terms and fees vary widely.

That’s a game-changer when it comes to flipping profits.Your scenario reminds me of a client I worked with in San Diego who flipped a condo after living there for a couple of years.

I have been playing the multifamily game for almost 10 years now, and the GRM is one of my least favorite methods personally since it ignores so many important factors (steam boiler versus electric baseboard heat as an example). 

its funny how this changes with time and the market on BP  if you asked this question 5 to 7 years ago you get drowned out with the cash flow is the ONLY thing and appreciation is for gamblers my self I have always been about making appreciation games in RE.. by either value add building a new product or buying foreclosure and flipping or lending money and getting instant 12% plus returns . 

Each jurisdiction has their own Zoning designations and restrictions, and they can Vary significantly.

I seem to remember that I didn't even have a business card until then either.You are VERY late to the game to be making these decisions. 

I own a property management company and am looking to get into the investment game too and to meet people on a similar path.