So, if the plan is conducting a business such as flipping houses or owning a portion of a business run by others that provides a service or product, then UBIT can apply.

There is no timeframe on that; although most buyers want to buy a finished product.  

If only option was to rent the top as a 3br, numbers are still favorable for the product in my market.

It may also be used by some lenders for other credit product application evaluations (such as credit cards, personal loans, retail credit, student loans, etc.)."

I'm not a lawyer is this is mot legal advice and every state is different so check in this but construction defects have a 10 year statute of limitations so if the leak is because of the more recent work the contractor will probably be on the hook.

It's equally likely that the seal gave due to age or manufacturer defect.   

Many lenders have asset depletion products and some portfolio lenders will consider Schedule D income.  

They could have found defects, etc. and lowered the price during contract.

During your ownership you can order property inspections to manage its condition and help mitigate any physical defects that will be a detriment to value.  

Are you seeking best lender or best product?