@Randall Wildner and @Jim Adrian@Mike Freidenberger.Lots of people sleep in their own basements even if they are not technically/legally a real bedroom due to the issues raised above. 

Is it best for us to do the survey, site testing for septic, and turn in a plan to town while my partner still retains ownership, and then sell the deal after approval?

Hi Robert.I was born and raised in and right outside NYC.

Finding a building where you can raise the value with general improvements or with better management is going to be the best suggestion I can give, but making the first step and getting "into the game" is the most important step.

What would you do to raise that capital in time to start 2017 as a bonafide real estate investor? 

@Tom V When calculating my numbers I was never concerned so much with AVR because my thought was that if I was able to significantly raise the income of the building enough to support the money spent on the renovations that it did not matter. 

Outside of fund raising cash, are there different banks or loan products that I'm overlooking?

If they pass these test than usually it's a good deal ;however, there are always exceptions. 1st- 2% rule- Your income from this property should be > or = $2,700 a month.

IE homes went from 500k on average to 1 mil. ( talking SF peninsula and prime LA) there were many human interest pieces in the sunday papers ( remember those you used to have them delivered to your door and then read them )... about people doing just that cashing in and moving to some little town In Iowa or Ohio or some other very inexpensive place to live and raising their kiddo's etc etc.I would think our average dual income family ( that's average earners) probably make 100 to 120k a hear combined... my 36 YO has a salary over 200k at intel plus her hubby... and they live nice but not over the top.. if she could telecommute to some other mid west area that would probably be a nice living and lifestyle.. but its still work .. but their is work in all we do whether its rentals or going to work. 

Since I was in Texas and planned on staying there I found out that I was qualified to take a real estate broker test without having to take anything extra so I got the license.