If your plan is to rent per bed or per room, I'm unaware of anyone making those types of loans.  

First the type of real estate doesn't matter as long as it is used for investment. 

When making this type withdraw you must not only consider the 10% penalty, but also that the monies from the withdraw could be taxed at a higher rate.

I would like to touch base with an engineer type for some quick guidance and approval (obviously at a cost).

Properties are relatively inexpensive in some of these rural towns but I worry about what type of rent could be collected in these locations.Does anyone have any suggestions about this, or what they would recommend?

Currently the rear of the garden unit is divided up by walls to create a furnace room somewhat in the middle of it, and a second closet-type room to access the furnace room.

People should only do this if they love that type of work.  

Sounds like the type of loser that has nothing to sue for and never will.

create a plan ONCE you understand your goals and objectives... you might find they change the more you learn about what type of investing you want to do or more important the type you don't want to do...

Two types of upfront costs:- Before Closing:  Only thing that should be charged here is an appraisal, and most of the time this gets paid directly to the appraisal company, not the lender.