Due to the confusion on their end and their slow response, it's costing me more money than if I just went directly with the vendor from the start.

@Donald Hatter We send the information to a collection agency who attempts to recover the money; after they make several attempts they place it on their credit report. 

You're either doing it yourself, spending a little money and hiring/managing someone else to do it, or you don't do it and let the leads rent from someone else.

I like the cash flow on them, if you rehab them right the first time it won't be a money pit. 

Most people don't sell an STR that is making them a ton of money so odds are it could look better, although they could be selling it for other reasons.

Sale Price$171,000 - $55,000 (Rehab) - $13,680 (8% fees) - $40,000 (profit) = $62,320 MAOFrom talking to other investors and doing research, typically a Novation allow more money to the seller, correct? 

Apply for a dimensional variance on the vacant lot to allow a smaller lot and/or setback so it can be built upon.Your best first steps are to sketch a plan, possibly with an engineer's help, then contact the zoning department to discuss your idea with them to get informal feedback on your liklihood of success before you spend a lot of money.

He has been saving his money for years and has plenty of money saved but no experience with real estate investing.

Perhaps you could consider hard money in addition to private money?

As for being a hard money lender.