By your calculations, the final annual return still sounds way higher than if I used mutual funds or a money market account to save.

I think folks that get disappointed with turn key are under the illusion that its like buying a mutual fund or something like that.when in fact what is done for you is simply this.1. a rehabber ( turn key outfit ) has sourced and rehabbed ( we hope) a rental property and sold it to you 2. they may have put a tenant in it 3. and they may own the management company ( wise move for most turn key as they keep better contact with their clients and over time this becomes  nice profit center) Once you own it you have to be engaged and stay engaged as the owner if you don't your going to usually have disappointment.. and if you as the buyer think just because you bought turn key that you need to hardly do anything for the rest of the life of the investment well then your setting your expectations up for some disappointment.

If the tenants keep complaining, I would offer the tenant an option to terminate the lease mutually early without penalty.

This is beneficial to me for him to stay and pay till that time noted due to the terms of my deal and I would be rehab and flip property after tenant is out of picture.

If the tenants are on longer term leases, you will need to honor that lease to its conclusion, or negotiate to transition the tenants over to your lease by mutual agreement.Remember, you will be taking someone's home away from them, so be kind.

If both parts do not come together where both are mutually getting out of the relationship what they feel they should then it might not be a relationship to pursue.    

The best option for all parties if to mutually agree to end lease, and let her move out with 30 days notice.

You signed a lease with her at a rate you were comfortable with, friend rate must have been mutually beneficial.I would confront her about it if it is spelled out in the lease that she can't do Airbnb (Airbnb is not the same as subleasing...do hotels sublease you a room?).

So.. this seems like a situation where an llc would be beneficial.

You might as well save yourself the headache and put that $ into a mutual fund which will get you 6-8%, you should be looking for deals with 15% CoCR. $200/mo without paying your self for being a property manager is not a good deal!