He believes that area where he will be buying the new homes is going to appreciate and attract more MTRenters, but now, the big difference is that he would now have 3 properties that can go up (or potentially down) in value, go up (or down) in rent, and three times as many vacancies to fill.My back of the napkin assessment is that for only a drop in $200 a month in cash flow, he would control a lot more assets with growth potential and as rents rise over the coming years, the combined rents will increase to a total more than the single rent.HOWEVER.

They must scare at least 40% of your potential customers away.  

I have a pretty large emergency fund in place for those properties, but I wonder if that capital could be better employed elsewhere (potentially acquire another property).  

I'm also looking for stable population and potential appreciation. 

A second STR in a market with year-round cash flow potential might balance out your portfolio and give you more consistent income.

Your property definitely has the potential to benefit from a cost segregation study.

Also makes it look professional when a potential renter comes to look at it.

I will be living in the guest house, while renting out the main.Both units are without washer and dryer units, my question is, do I supply them in the main house; or let potential tenants figure that one out?

I was wrong to fall in love with the potential of this development.

I would put it in your listing details and also potentially house rules.