How can I check to see if the unit is illegal not?

The challenge arises as the city permits only true divided lite windows, leading to a cost of $40k for 4 custom-built wood arch windows to replace rotted ones facing the street.

Check with your county tax assessor. 

Please check out this recently published article on BIggerPockets which addresses your exact question - BRRRR financing pros/cons of all the options (Cash / Hard Money / DSCR / refinance options)https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

NY isn't TN so you need to do your research and check the comps.If you acquire it, you'd have an option to flip it, develop it or live on it.  

I would check with your local building department.

This is so that the lender may demand full repayment if a property with a mortgage is transferred into an LLC and a due-on-sale provision is triggered.Before putting the property into an LLC, make sure to check with your mortgage lender.

You can also check meetup.com or search facebook for real estate investment groups, clubs, or meetings in your area.

I should've asked my contractor to get on the roof and check it as well as the appliances, the boiler, the radiators, the windows.

Also I hear with hard money, it is quick turn around with less document checks.