He says that this property should be easily sold between 200 to 225K.I asked him that some comps are around 140K and he mentioned that we will do some high end rehab with some modifications(adding extra bed room) which should give an ARV ~225K.

The city of Naples doesn't have a minimum sq ft requirement so they were able to get the permit and do it.I think that it would be cool to build one and then rent out during high season.

Like above, what government authorities do I need to work with, where would I go to apply for permits, etc. 

Part will depend on the price range you're buying and selling....under $200k they're earning their money....under $100k, you need to pay me extra, no matter how many you do.  

Now, SQUEEZE $200k out of that extra $100k!

Just for some extra money to later invest?

This includes design, drawings, submittal to city and permits! 

He required a $5,000 deposit and then a higher monthly payment with the "extra" applied to buying down the purchase price.If the buyer defaulted, he would keep the $5,000 deposit and he had the monthly payment that was higher than it would rent for.

We don't know your numbers, so can't say if it is worth it, but it probably isn't worth an extra $50K/unit, if it's an extra $50K spread across all 8 units...maybe.

Is there a way to figure out how much extra people charge for average properties in a good location vs  average location?