I could also ask him to provide a report from his business (he is self employed) of his P&L and transaction reports to make sure he is making money etc. 

Furnished mid and short term rentals will cash flow if managed correctly and you find the right location and property size. 

What are the lot sizes?

and "How can I employ a strategy to make this property work?"

For you, it will likely be business income / ordinary income(non portfolio) where it will be deemed active / passive depending on your level of participation.There are some court cases out there where people who originate 4 or more loans in a year are moreso deemed in the trade or business of lending money.It will depend on the original poster's taxaccountant to determine how he/she will treat the income.The one con of it being business income is that it may be subject to self-employment taxes.

As long as the property generates enough cash flow to service the debt, you qualify—without the need for personal income verification.This type of loan is ideal for those serious about growing their real estate portfolio, especially if you’re self-employed or have irregular income streams.Why DSCR Loans Matter for Real Estate InvestorsWhen it comes to real estate investing, traditional loans can often be restrictive, requiring personal income verification and imposing limits on the amount you can borrow.

Unless the place in an amazing location that couldn't support a full size home, you are better off doing a regular place.A tiny home isn't considered real property.

Our lender’s instructions now require all acknowledgments by a notary employed by the title or escrow company.

It's not that big of a problem if the zoning allows for 3 units on a property of that size, however in most cases like this the conversion would have been done illegally or at the very least is no longer a conforming use.The shared water meter is pretty typical for multifamily here in Tampa.

Most 1099 self- employed investors generally write everything off so using 1040's, 1120's or 1065's is a no go for tax returns.