I would like thoughts on how to finance (we would need approx. 200k) building a duplex (a barniminium with half storage half and 2 -2 bedroom apartments).

The house is in extremely similar condition to ours (25-30k rehab) when we started but has a storage building, covered back porch, and little more yard space.

We know that it was appraised with a Specific Zoning Classification: R1-6 - "Zoning Description: Single Family Residence (Density Range of 5 To 5.5 or 6.5 w/Bonus)" and that the County Assessor recognizes it as such.Public Works has sent out 5 different inspectors who have given different reasons why it is multi-family (e.g. the casita has an exterior door; the casita has a sink; we could feasibly rent it out and the renter would need their own trash service [we have only one large trash bin in the alley shared by multiple residences]).

Both payment options are feasible to manage if vacancy occurs/tenant defaults. 

If you have an experienced VA lender, they should be able to provide a bit more detail on how this works and the feasibility of using your VA loan more than once.

He can’t afford storage either.

Rather than prattle on about this I will point you too this article I wrote on this topic recently:  https://www.biggerpockets.com/blog/investing-in-self-storage-why-cap-rates-dont-matter-that-much#:~:text=If%20you%20don't%20have,be%20unable%20to%20refinance%20it.

Yes, I think all are feasible but in the end would hugely be in the sellers hands and this usually comes from relationships.

Make it a master suite or something like that.It looks structurally safe, they intend that Attic to be storage so weight shouldn't be a problem. 

All he would have to do is rent a self storage locker and put the motorcycles in there as well as his endless collection of tools.When they moved in I was there and didnt see any of this hoard.