No way to estimate the cost until the issue was exposed. 

I'm not seeing absorption rate issues, but really need to sit down with some subject matter experts so I can do a quantitative analysis and 'pitch' with confidence (to investors and banks) before buying our next apartment there.   

I would also run the addresses through the enforcement database and ensure that there is no pending demo order or some other insidious board of health issue. 

I would greatly appreciate some thoughts on this issue.  

I am not disagreeing with you, just looking for guidance on how I can protect myself, as well as avoid any issues.

I wasn’t aware of those insurance issues.

In those instances, the owner can avoid all the bankruptcy related issues Mike mentions by withdrawing the bankruptcy, and you may find that solves that issue.

My question is that if I get approval from the local town and the property variances are changed would it be allowed to convert said property into a 5 or even a 6 flex without any issues arising from the VA loan lender?

Is it an issue if the area is rural and not suburban?

Not a problem for AZ, but it might be an issue in your neck of the woods.