But the main reason I came back after the app was eliminated was to simply help people not make the same mistakes I did.It would be cool to somehow improve my knowledge, networking etc thogh.

If Eli operates his business correctly he will personally be fine and given the collateral is an FHA property the transactional costs simply don't justify the added transactional expenses if a risk analysis were run.

Ultimately a 1031 would have been the smartest move to buy another property and simply do a cash out refinance in 6 months to have access to some of the funds.

Like @William Collins said, there are opportunities out there but if you are too excited, you will overpay and then be stuck digging yourself out of the hole. 

I would think a lender views the STR as a higher risk simply because a long-term tenant has a defined lease in place, that is usually 6 months or more in duration.

We know we could apply for a zoning change, but that process could/would take months and we are beyond ready to move onto our next investment.Has anyone else come across problems like this, where the lender is going down a rabbit hole and denying funds because of something that could possibly happen in the future?

Cashflow is simply what is left over after an asset generates revenue and pays all of its expenses.

So It looks like it was simply lower level employees with lack of knowlege. 

Apart from many holes in the walls, the tenant had put screws into all the window frames some of which went all the way through to the outside. 

You simply had to eat the costs.