If someone could explain how this operates in the real world, and why it merited its own Rev Proc, that would clear this up.And in particular, how would this affect the example given by Mr.

Frankly, once the asset equity is determined to have sufficient merit to pursue, I would hire legal counsel to rep you, not the Son.  

@Jason MercheyI wrote this post 6 years ago, but I still think the points have merit.

This is not an arrangement I have heard of before but that doesn't mean it doesn't have merit. 

What you are saying has merit. 

Giving the state of the eviction moratorium in Illinois and around the country does anyone think the FHA- owner occupancy standards have any merit?

This tenant has already proven their merit.... but to protect yourself, you could incorporate a 60 day, one way lease termination and an escalation clause. 

In any case, securing a construction loan on top of that is not a given as experience, track record, feasibility, profit projections, credit, net worth, personal liability, etc all come into play.For as long as I’ve been in real estate ( 40 plus years) there has been a myth going around that in the commercial debt arena personal guarantees, credit, experience, etc aren’t relevant and that the “deal” stands on its own merits.

It's clear that your strategy has significant merits that are worth considering.  

An occasion that merits cheering in Pensacola.