I used to work in Planning & Zoning. 

Red flags for me include people who are overly optimistic without considering risks or those who don’t seem to have a clear plan for their contributions to the partnership.

I am drafting the lease and planning to take it with me to closing, where we will be executing the document.

Do you plan to live there forever?

I would list the property and advise the tenants you are planning to sell. if they want to stay month to month, that's fine.

It depends on what your plans for the property are. 

You are going to get conflicting responses on this because a lot of it comes down to your plans and your tolerance for risk, which are things known only to you.

Provided I can establish a solid investment plan tailored to their financial needs/comforts such as debt ratios and income, they would be more than happy to offer me some financial control.Additionally, If I wanted to, for the sake of building my own personal wealth, I admittedly have the luxury of taking a loan from my parents.

Now I am brand new to real estate so this could be dumb but I'm reading Brandon Turners "Rental Property Investing" book and I was intrigued by chapter 3 where he list out 4 plans to start with when getting into real estate.

My plan would be use the 401k kind of like a hard money loan where I'd acquire the property, rehab it, then refinance long term, pay off the 401k loan and get it rented.