The tea leaves indicate that only the owner of the property will be able to get a licence for STR, with most indications being they must be an owner occupant. 

I'm curious what leading indicators people use to determine what areas may increase in value.

@Scott Royer you need to be very careful.They can't qualify with a bank which indicates they are high risk.

If it is what the seller is paying, it’s an indication of what you might be able to get, but I would not assume it’s what you’ll end up paying.A few things to check when doing due diligence on the insurance.....Cutting back the insurance coverage prior to the sale is a strategy to give assets a higher return.The seller may be able to insure the building for what they paid for it 10 years ago, say $100,000, and now you need to insure $200,000 to satisfy the bank loan.  

Good credit is not necessarly mandatory to qualify for a loan however it is a clear indication of a individual with very poor money management skills likely not equipped to be a successful investor.  

The management company indicated that 35% was a good rule of thumb for expenses but that seems way too low after reading many posts about the 50% rule.Financing - a 10% downpayment on an FHA loan, with 4.75% interest, and $268 of PMI each month for 132 payments.

And, at Punta Horcones are the best surf breaks in the area: Indicator, Dinosaurs, and 411.LOCATION:Cambutal is the new, up and coming hot spot for surfers and deep sea fishermen alike in Central America.

That's where I would start, that's always your best indicator. 

A "yes" to any of the above questions may indicate an S election is less attractive.That is why I suggested he get with a cpa and work his specific circumstances.We're in agreement and both mentioned this in our OPs.Doesn’t he have to issue w2s for the employees as a DRE or any other entity or election?

This also makes it so that I am not relying on the cash flow.I think where our perspective is different is that I believe that various indicators can be used to predict with a lot of accuracy whether a market is likely to have long term appreciation.