You have mentioned a few things that should be red flags.  1.  

@David M.My family member is getting the hard money loan for me.

You indicate you know the law (assuming including the rent control law), but here are some thoughts:You can only legally terminate the tenant for a rehab extensive enough that tenant cannot occupy unit or to move in close family if your lease indicates that moving in family member is a reason for tenant termination. 

Please remember that a new tenant/occupant always means that a contract can be re-negotiated since they were not there originally.

With the recent election, one council member is somewhat opposed to STR (or more strict regulation) whereas a few of the others (as well as the new Mayor) seem to support STR and trying to find a path forward to support STRs and affordable housing.

@Adam McAllister get a personal loan or a private loan from a friend or family member. I

Maybe someone walked the property who wanted 2 bedrooms and noticed it wasn’t a legal bedroom and it had to be re-listed as a 1 bedroom. 

Family member is older and wants to help out with initial cost of purchase but would then like to be hands off and just get paid a split profit from the STR.

Therefore, working with a large real estate lender (such as CoreVest..if you find a better let me know) opens many doors. 1 Portfolio Loan with cash out:All of your individual mortgages become one mortgage associated with an LLC which will be re-appraised at current market values giving the opportunity to cash-out.

The succession is to a manager named in a Living Trust that is a successor business LLC op agreement member. IE