Any turnkey company (or really any company) that tries to sell you on the idea that they're doing you a favor, losing money, by 'letting you' get such a great deal, is lying - that's a used car salesman tactic and huge red flag.

Thanks for the read.Cliff Notes.Read all bold print.

I know how quickly things can go into the red in this business.

If you do buy it and allow him to stay (via lease or other means), make sure he signs something that says in BIG BOLD LETTERS something to the effect of "I UNDERATAND IAM SELLING MY HOUSE TO JOHN SMITH AND THAT IF I DO NOT MEET THE TERMS OF MY LEASE, I MAY BE EVICTED. 

So, from the get~go as a full rental, I'm $400.00 bucks in the red, monthly.

I learned in deep red states that lawyers are usually not needed which can make the return even better.

What if one day the home owners association decided to not allow short term renting or possibly the state of HI passes laws banning short term renting (it's very controversial over here) and over night I go from a great cash flow rental to a rental thats in the red and possibly underwater if the bubble did pop.

I bolded the part that seems salient.Example : Jane buys a home on January 1, 2009 for $400,000, and uses it as rental property for two years.

I understand that trying to do this several time will raise red flags for the lenders, but what if once or twice only before going in with more cash?

As an architect myself, clearing the red tape and getting through the municipality review process to attain permits and then the contractor complying with the necessary inspections can be time consuming.