My basic research gives me the impression they have a lot of experience, so they should be able to do design, permitting, and construction efficiently, so it is good to hear from an actual client.

Our initial plan and design costs alone are typically $5-10k... plus permits which are typically a couple of thousand, and misc. other startup costs that are state and federally required prior to the point when we can even think about putting the first 2x4 on site (For example, sediment barriers, tree fences, etc.)I'm also a bit surprised at a 10-30% holdback.

John, as Matt suggested, the sidewalk that was modified is indeed owned by the city, but we did pull a permit to modify it. 

If you are looking to a get a general conventional loan for a property of 1-4 units that you will not be using as your permit residency then yes you would be looking at putting 25% down.

My plan is to put a fence with a gate and rent out spots however my questions are does anyone have any experience in this and what permits are required?

And if they are permitted to get away with this, what else are they going to try to get away with? 

Are you licensed, insured and able to pull permits in your local jurisdiction?

After home inspection, the condition is not that good but acceptable, has Asbestos problem, missing insulation on the roof, couple of pipes need to be replace and also water heater tank, the basement has bathroom but no permit.  

In the Southern United States, it is common for landowners to lease out the farming rights to a piece of land, while using that piece of land for hunting or other recreational pursuits.

The determination that a property is being used as a transient accommodation use shall be made without regard to the form of ownership of the property or unit, or whether the occupant has a direct or an indirect ownership interest in the property or unit; and without regard to whether the right of occupancy arises from a rental agreement, other agreement, or the payment of consideration. (1) The term includes but is not limited to hotels, motels, recreational vehicle parks, tourist lodging facilities, resort condominiums, resort dwellings, vacation resorts, and dwelling units occupied or available for occupancy on an interval ownership or "time share" basis, when any of the foregoing are made available for occupancy more than three (3) times in any consecutive 365-day period and the right of occupancy is for a term less than monthly."