I would talk to your lender - there might be state specific issues but I know alot of folks (myself included) that bought only in one name.

It sounds like you'll be improving on top of a ground lease issued by the municipality. 

I'm not sure competition was the problem for you - sounds like it was more an issue of marketing and managing the lease up process.

We've contacted Zillow for assistance, but the issue has not been resolved yet.Has anyone encountered a similar situation or have any advice on how to proceed?

The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations.

You have a major advantage because like you said, you are able to utilize your VA eligibility to get your foot in the door.

:Class A Properties:Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Vacancy Est: Historically 10%, 5% the more recent norm.Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.Class B Properties:Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 yearsClass C Properties:Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation.

The main issue with Pasadena is the high price of entry and long timelines for Building and safety permits. 

@Zachary Jarvis, the real key to success, and the major variable and risk in any flip is the construction side, like Bruce noted.  

Who are the employers and what major construction projects are underway?