On top of that, this industry is heavily regulated by the state.  

Not licensed in NJ and do not know all the regulations, but I am fairly certain you can't do it the way you are.

Call me selfish, but a collapse in real estate would help me immensely.But I'm glad we didn't get a governor who wanted an income tax and obscene levels of obnoxious regulations.

Over 370 of us formed the CS Short Term Rental Alliance to work with the city in coming up with a fair and balanced regulation. 

I highly recommend to hire a knowledgeable and proactive accountant who will help you take the most benefit out of the tax regulations.

That's not my market, but it seems like excellent news to me - regulations like that encourage responsible ownership/management without severely handicapping the industry, and in my opinion creates a safer environment in which to operate a business without fearing that super-strict regulations could swoop in at any moment.  

If the condition is just too bad for this, and rules & regulations prevent this, consider #2.2) Seller Finance with a reasonable down payment and carry the note for the difference. 

How do we structure the deal while be compliant with SEC regulations? 

You will most likely need to give proper notice to non renew the lease and if she does not leave evict.Learn your state landlord tenant regulations then come back if necessary for clarification.

The state also posts public regulations.