The zoning is now a very workable issue if you do it right thank to some (sigh) more government regulations on Fair Housing.

24 unit 3 buildings 8 one bedroom units each Appleton Wisconsin asking price $987,900Total rent income $142,718Yearly advertisement $500Yearly tax $18,431Yearly insurance $6750Utilities yearly $18,409Annual grass and snow removal $666Annual supplies in repairs $1725Total expenses $46,427NOI of $96,291Giving this a property Rate of 9.75%

One guy told us $4,000 if we supplied the materials, but he bailed on vacation and left us hanging.

What kind of pitfalls should I look out for, for the greater Seattle area (I'm mostly looking at the north Bothell, Everett, Lynwood areas), and specifically in terms of laws and regulations that could catch me off guard?

That inspection was to Certify it passes regulations/building code for Owner Occupancy.

Supply and demand, there will be more properties available.

Supply vs demand, interest rate, sold/asked $ ratio, DOM will tell you the trend.The key is employment or affordability.....  

In some markets, supply remains very low, and prices continue to creep up with demand.

The other thing you may want to explore is digging down one more "stick" ( approximately 20 ft) many times that extra 20 ft will hit a fresh water supply and the issue is solved. 

The IRS recently passed a regulation that a minimum interest payment has to be charged.