The reality is that the tax impact and ability to take ANY losses (as Michael mentioned) is based on a number of factors that include whether or not it is a "separate dwelling unit".

-- Roommates could accelerate your savings and give you experience dealing with tenants.How are you going to handle two mortgage payments while your rental sits vacant for a few months - or do you naively think everything rents instantly?

The landlord responded that the lease was not subject to the Rent Adjustment Program since the rental was for “sole use of one or more rooms and shared use of common areas (such as a kitchen) in the residence,” which was a single-family home.In its decision, the court focused on the definition of a “dwelling unit” as used in the exception found in Civil Code section 1954.52(a)(3)(A), which provides that “an owner of residential real property may establish the initial and all subsequent rental rates for a dwelling or a unit about which the following is true…It is alienable separate from the title to any other dwelling unit….” .

Your downpayment would be instant equity and your consistent cash flow would lead to equity over time.

The clear and obvious answer would be to instantly pay the back taxes and offer a small lump sum for them to move with and just lowball in whatever structure works for the both of you weather that is a better sale price or a greater monthly payment to them and just find your middle ground that works out for you both.

The value of that place would go up $100K instantly with the new look.- Cabinets look good but I'd get rid of all the clutter above.- Take all the cheap prints off the walls. 

Any advice you can provide would be greatly appreciated1) In the Short-Term Rental Ordinance (Baileys harbor), I found the following:“If the rental of a Residential Dwelling is less than seven (7) consecutive days, the first dayof a subsequent rental of less than seven (7) consecutive days may not begin until the sixth(6th) day after the first (1st) day of the immediately preceding rental.”Question --> Does this mean that we cannot host another guest within the same week if the first guest's stay was less than seven days?

I'd assume it would have to be appraised as a business rather than a dwelling/real estate. 

This is in FL and the lease says "We will not be liable for any damages, loss, or injury to persons or property occurring within your dwelling or upon the premises.

I'd look at doing an FHA 203k or a homestyle renovation loan to add some instant equity on your next purchase!