Any CMX zoning? 

Otherwise, I probably won't be able to get enough rent money to cover my expenses or even come close (I expect expenses like mortgage, PITI, etc. to be at least $2100 / month on a $300K house, but I'm a beginner so I may be wrong).Apparently it can also take a year or more to get your house officially zoned as a duplex and can cost a lot of money in paperwork and attorney fees to get it done.

We bought it as a SFH, knowing the zoning allowed for additional units.

We are in the very early stages ofdevelopment (many calls/visits to Planning & Zoning, Landsurveyors, county water & sewage dept, etc).

That should be a big red flag right there.Houses with arvs in the mid 100s in the right part of town are a good idea. 

First - check the zoning, make sure that a daycare is allowedSecond - check the parking, make sure the property has enough, or you can put enough.

The money owed, especially being recent, is a huge red flag.Nolo had a good write up:https://www.nolo.com/legal-enc...

On a few of the interior walls there were red x’s drawn in what looked like red marker.

With Providence recently passing the law requiring AirBnBs to either be owner occupied or outside residential zoning districts, I wanted to explore the option since the supply of STRs should be shrinking to see if it would be worth the added turnover and management.

I would start by calling the local zoning office or whoever sent the notice and discuss exactly what the notice means and then if needed I would reach out to an attorney.