(garage converted to room, illegal)I really want that property and the only options for me to go with FHA.

Should I charge a large deposit and make them convert back when done?

If you tore down the pool house and pool and built a garage with apartment above (at a cost of $150K), still to be used as part of your personal residence for guests, and the new value of the property was still $750K, then I don't think you could roll all $900K you had spent to date into the basis once you converted the estate to a rental.The principle is that you disposed of a personal asset- the pool/pool house, with a basis of $150K, for a loss. 

This would avoid converting the $100k paper loss to a real loss right now.

Any possibility of converting to tenant paid heat?

In order to not have problems insuring it, is it possible to convert the flat part of the the roof to a sloped roof?

Can you convert the attic and add stairs?

The estate is not liable if the home sells for less than the balance of the reverse mortgage.In the event of death or in the event that the home ceases to be the primary residence, the homeowner's estate can choose to convert the reverse mortgage into a traditional mortgage to keep the house or else sell the home to pay the balance (the cash borrowed, interest, and fees).

Problem with real estate is its liquidity, its not easy to convert into money in a short period of time.

The garage was converted, but more than just tile and a fan light.