Depending on your scope you may not need a permit; however, the City also has a streamlined "Easy Permit" process for pull & replace projects, in addition to the standard permit process which would be needed for additions or significant interior remodels where you are completely re-configuring rooms or adding bathrooms, etc.

Due to this we are unable to qualify for a large enough mortgage.Question 1: is this pretty standard across the industry or should we keep looking and see if other banks would consider this rental income as income?

You may want to just get some standard comps ran so you have a general idea of ARV.

Any advice on what is standard to expect.

Scenario: I plan to acquire 2-3 self-storage facilities in the next 1-3 years.

This may put a sponsor in a precarious position in that if they hold the LP capitol and do not deploy that in essence the LP is losing money on that capitol, in addition this may then tempt a GP to force or at least be tempted to lessen standards simply to deploy capitol.  

., lower standards for income). 

I would give her the standard grace period (whatever is dictated by lease) and then let her know that she is late and you will pursue whatever remedies you have at your disposal. 

I take the standard deduction, so interest on my primary isn't tax deductible. 

@Tim Swierczek helped me get the FHA 203K as the property didn't meet the standard FHA requirements, plus it's a great way to wrap the rehab costs into the loan so you don't have to pay out of pocket.