@Jameson Valcin  First step before you buy, is to first find out what the property is currently zoned, what the community desires it to be zoned, and then what is the value for that type of development. 

@Zach Gring Throw PM fees on top of that and you are way in the red.

Are there any red flags or any I should look for before accepting the loan?

Owner has zoning permits but is trying to sell property.

The ability to expand is also a big deal and I bet it won’t take you a tenth of the time it would take here with zoning, permits, etc - in addition to costs. 

If not, no problem, if you tell them you donate to the Red Cross you qualify as well.  

-most importantly, is the property zoned as a duplex?

I think we have a long way to go for new construction to reach the area that you are looking in.Depending on the price and zoning, the parcel you are looking at could still be a decent buy. 10 years is a long time.

As a result, our cash flow dropped precipitously and operated in the red on many months until about 2010.

Legally, it is zoned as two units, that is it.