When converting common living areas into additional bedrooms, many DSCR lenders might view the property as non-conforming, which could pose challenges.

That means either you won't cash flow or your Return on Equity (ROE) will be terrible.Since this is your primary residence you'll be exempted from paying capital gains taxes when you sell.If you sell to your parents, it will be considered a non-arms length transaction and will get closer scrutiny.

Keep in mind the following: 1) If you don't have enough cash for the entire purchase in the TSP rollover to IRA, your financing options would be limited to a non-recourse loan.

And even within REITs, while most people think publicly traded, you can also get into Private REITs, non-traded REITs, etc.  

He could try to evict you for non-payment of rent.

Is it overkill for a potential non-problem?

The government does. 

Note investing can be divided into performing vs non performing.  

Fannie and Freddie are the government sponsored enterprises- conventional loans are underwritten to their guidelines. 

I recently read people making up to 117k a year can qualify for public assistance in SF.