I lived in Houston for a dozen years (moved last summer) and really wanted to make an STR work, but I just couldn't get there.

These type living arrangements are primarily short term until user circumstances change

There just trying to eek out a living too.

I have a client that lives in Hawaii but owns a property in DC area.

Oh I agree with you if that rent will be a business income to live on vs just an unrealized gain.

Especially if you haven't lived in the area previously and know the area.

House care, lawn care, condition of cars, street conditions, absence of pay-day loan shops... basically all the things you look for when determining where to live yourself. 

So they will rent without buying even though buying is available to them but they dont want to live where its affordable.

well if I ever make it to the Smokies to see what the draw is  I will rent a condo then :)  I am just guess but I suspect folks that go there want to be in the woods and hear the birds and maybe some local mtn views etc.. or some sort of privacy they never get at home out east were there is not very much public lands close to where they live in the big city. ????

I haven't lived in it long enough to be exempt from capital gains, good point on that.