Or at least my loan processor asked me and mentioned a max of 70% LTV.

As mentioned, the gift tax may kick in too.Keep us posted on how this progresses.  

I should also mention that if I do a rehab, I would like to start with more of a "remodel" so that I am able to start small and build up my risk tolerance.

I have found the best way to address is to pull all the carpet and spray the floors with Kilz, as you mentioned.

With your limited construction experience, I'd either bring on a construction manager or as I mentioned (and prefer) include administration services with your chosen architect. 

I know the music school you mention in your post- I used to teach on a college campus down the street!

I noticed you mentioned nothing about that, or that you might be a registered non profit, attorney or other exempt from licensure entity and, I'm sure you pointed the borrower to New York consumer protection agencies so that they could understand their rights and protections that may be available to them against foreclosure rescue fraud....but then again...you're a fast learner.

Thanks for the mention Account ClosedI am not speaking in reference to a rental in any capacity.

However, with that said the areas that I mentioned above most certainly are not easy areas to invest in as they do require more capital. 

I have friends who own property there and like the location because of what you have mentioned above.