We require first and last month's rent and security deposit prior to move in.

Not sure what the interior will look like, but hopefully you have photos of prior to occupancy, so that you will be able to claim against their security deposit, and a judgement for past due rents and any damages

Like the others said, I don't see how VRBO would even know you had a direct booking, or what would make them think they're privy to commission on a booking they didn't secure.

I’m moved to have secured my first deal!

You would choose the tenant so you would have a decent amount of security on who is living there.

Option Fee, Security Deposit, etc) can you do it with no money out of pocket?

Cons are the liquidity event that your parents will have to do to purchase the home (I assume the funds are in some sort of investment today so there's likely some tax ramifications on cashing those securities).

There’s no specific IRS rule against refinancing a cash purchase and deducting the interest, as long as the property is used for investment purposes and the loan is secured by it.

With really bad credit I do require (in addition to first month and security deposit) 1/2 to a full last month's rent and/or a good honestrenter.com score.

Your conservative approach to estimating income provides a solid buffer, and the strategic location adds a layer of security.