This might give a one-time (non-scalable) boost to cash flow, offer multiple value-add options, and allow the house-hacker peace of mind, via the assumed mortgage, in long-term breakeven or positive cash flow in the event that the value-add plans end up not being executed, and/or the person has to move out, and rent by the room or STR become unavailable for some reason at a future date.

“ cash flow returns” almost always compare horribly to a simple bank CD after you deduct for insurance, prop taxes< vacancy, capex, prop management (or your personal time.) etc etc etc. 

Focus on the person (the seller), not the offer.

this is only a good idea if you have reason to believe that the area will be appreciating quickly, which is called speculation and akin to gambling not investing. me personally, I would rather put my money on black than bank on market appreciation. negative cash flow rentals are a time suck and money suck.

Personally I like to build with cash to avoid the extra expenses, so I dont actually finance anything until its done and I have decided to hold it.

I don't have a solution but I think a real estate attorney or a title attorney would be a good person to talk to.

We used $100k of private money and the rest was personal cash.

I personally know the person that owns the property and am close friends with him.

This is not personal, but if a person cannot save money now real estate is the worst investment to get into as it is one of the most cost intensive businesses to be in.  

I would recommend targeting 30 day minimum rentals (Most associations are 90+), allowing 12+ rentals per year (most allow 1-3), and no in-person screening for tenants required.