The agent marked the inspection box as the reason for backing out but this was not an inspection and inspection had not been done yet.  

Offered all cash, no inspections and quick close.

During the home inspection, the inspector found the garage was concerverted to a living area with two bedrooms.The outside of the house has missing wooden siding in area and some areas have been replaced due to new windows.

I just had my final occupancy permit inspection - and FAILED because I never got the Mechanical Rough Inspection signed off. 

I would recommend getting a freelance architect who is experienced with this kind of work to streamline you through the building department and permit inspections.

The cash on a multi- 4 plex out here is roughly 3300+ depending on the part of the city but still closer to the 2% rule. 

Theoretically, lets say I get a house under contract with a stipulation saying I need to have inspections done before its closed.

Tell them you will send the deposit back after the home inspection is complete.  

Single family residences do not get inspected like rentals.

Property managers are always an options or partnering with someone who may be closer to the properties or be able to go there more often may be a way to go.