I'm trying to Figure out how to make this potential deal work.Seller wants to sell but not right away because they still use the house for some income. 

Sellers may struggle to mentally shift from "owner" to "tenant," which can create challenges with boundaries and property care.Security Deposit:If you’re doing a temporary leaseback, be sure to collect a substantial security deposit to cover potential damages and ensure they vacate on time.

I instead look at it as a potential red flag.

(If not, then you should, IMHO)We're all in sales ultimately, and keeping potential business associates on a marketing list is our lifeline.Also, if you were "politely told" that it's not a great fit - how is this a problem? 

Purchasing a STR in a somewhat sketch area is a terrible idea and as others have mentioned, is going to open you up to potential issues. 

The properties are well located in Denver with value add potential and all rents are currently well below market. 

Are you currently working on lining up funding or looking at potential properties yet? 

Real estate investing has been a passion of mine for time with my mother also having invested early on where I likely have gotten the love and desire to follow similar foot steps.I have taken last 6 months to educate myself and currently own a single family home as primary residence and would like to expand to multi family properties (2-4 units) for additional stream of income, not to mention potential tax benefits for long-term investing.Based on current living situation, I have a fair amount of equity established in my primary residency along with having enough cash to either pay off house completely or use towards investing in a multi family property.Given that I'm the sole source of income for our household with my wife being the home maker for our two kids under 2, trying to weigh out risks with getting started now or perhaps waiting. 

Those are great areas with solid potential.

It's a great property with tons of potential but it's missing the IT factor.