You could build or flip less expensive units and sell them to your clients/occupants over time.

Open houses are typically used to generate leads, not sell houses.

The loan is short term, for 12-24 months and you will be expected to sell, refinance, or pay the balance in full at the end of the term.

You can sell these things in an up market and make an absolute killing.

You wouldn't want to pop a 2% balloon unless you sold the property, but make sure you write it as assumable so you can sell it.  

Some servicers label your loan as troubled and they sell it off ASAP.

Beyond carefully vetting the tenants, how can an investor protect themselves from squatters if we want to sell years down the road?

It's a small place so I'd guess it won't rent for enough to cover your expenses anyway so I'd probably sell, especially if the loss is small, it unless it's in a great neighborhood that you think will do well over time. 

I feel this gives me the flexibility to find the right solution for my client and not just sell what my bank offers.

They sell chemicals at the local Home Depot that gets that stuff off.