Obviously some potential issues with the lender, but how often do these deals really happen?  

If you did a cost segregation study on the property in the past, you may have to recapture the depreciation taken in the past.capital gain tax rates are 0, 15 or 20%There is also a potential 3.8% Net Investment Income Tax.Also, don't forget state income taxes depending on what state the property is located or your state of residency.Best of luck!

Additionally, there’s always a risk that any pet-related damages could be hidden under furniture or otherwise concealed, potentially leaving us to cover the costs if the security deposit is fully depleted by other expenses (e.g., damages or unpaid rent).

A law suit from a tenant can put your other assets in risk if they are inside that LLC. 

Do you have a step by step list when looking at the potential house?

And no matter what, keep an eye on how your financing structure lines up with your exit strategy.Where do you see the biggest risk.. sinking money into improvements or letting the buy back linger too long?

My mortgage will be $2,005/month, and I’m budgeting up to $600/month for utilities, leaving a potential monthly cash flow of $995.I also set up an LLC and a business account to track rental income and expenses.Questions:Do you have any advice for me as a young real estate investor?

Technically yes, but your odds of success are very slim and your potential will be very limited.

You have 3 months (potentially) to get it all sorted which should be pretty easy.If someone is selling a STR, that doesn't mean there are issues.

I'm trying to Figure out how to make this potential deal work.Seller wants to sell but not right away because they still use the house for some income.