I sat down with the owner of the property, and he gave me a survey that he had conducted on the property.

It is only illegal if you are wholesaling the property with representations and actually conducting a real estate transaction. 

Interestingly, one of my clients wants to conduct some research in the Kansas City area with folks who own rental properties.

That goes for any new construction deals as well.It sounds like you're a bit adverse to conducting illegal activities, so that is a good thing, if you want to deal in real estate facilitating transactions, get a licensee, you can do that part time too.

I can envision a scenario in which many of these properties in vacation communities convert to LTR, as they are not a primary residence, and the tenants conduct illegal sublets through craigslist, friends, etc. 

I believe DNS does a "secret shopper" kind of thing and sends out people to see if landlords are on the up and up.  

I have done thousands of searches as an attorney and even recommend my clients to them just because it's more cost effective than paying for my time to conduct title searches.

I will be conducting all of my business in New Jersey with the goal of flipping homes to supplement paying down a large rental portfolio.

It's only in conducting this deep dive that you will be almost instantly be able to tell if a property is a good deal or not.

I would start by contacting the title company that is conducting the closing.