All we would like to do before repairing the ceiling is to get his confirmation that he no longer experiences any leaking.

R-2 is typically designated for a residential zoning, likely higher density / multi-family. 

(I have no experience here)* people just accept the high assessment because they also like the higher property values relating to that?

So that looks like 4-6k in cash flow.

I am installing a security camera on the northwest corner of the garage to monitor the garage door and part of the common area where a criminal is most likely to approach the building.

Also, it looks like the tenant screening is from transunion(smartmove), what is the benefit of Story here (apart from the initial discount seen)?

I feel like that would affect the max occupancy when listing it for rentals but am still trying to get my head around local regulations regarding STR.Am I correct in assuming that we can only rent the home for a max occupancy of what the septic can "handle" based on local regulations?

I'd sell it or at least slow exit with a lease option since it sounds like you can wait. 

I would like to pull out some equity from my primary property so I can start investing in real estate, but my house is in need of some renovation.

Honestly the suppliers I deal with dont like dealing with anyone but contractors .