(Disclaimer:  for those of us who have no sense of humor, this was an attempt at humor and no way should be construed as being in any way discriminatory.)According to the article:"It doesn’t apply to sex offenders or people who have a criminal conviction that, after an “individualized assessment,” shows that denial based on the conviction “is necessary to protect against a demonstrable risk to personal safety and/or property of others affected by the transaction.”You'll have to obey your local laws, and do an 'individualized assessment'. 

But, in top of mind, the FHA prohibits discrimination on the basis of seven protected classes: race color religion national origin sex disability, and familial statusHope this helps!

He was also convicted of some kind of sex crime 11 years ago as well so the house would be listed in the register if he lived there.

Avoid anyone with sex charges or with anything violent in their criminal records....no matter how long ago they assaulted someone or with drug charges. 

I gave my tenant 60 day notice to move by December 30th, She was seen on December 29th moving with a u haul truck and her walk through was scheduled for December 30th.

If the guy is a registered sex offender, go to the police ASAP and ask if he's registered for your address.

Has anybody ever had this happen?   We started out thinking that a good way to start REI would be to buy a small SFH in a nice area.  Then at some point felt that maybe a MFH would be best... for obvious reasons.  Now...

I'm not a lawyer, but I'm almost certain that there NEEDS to be a reason in order to be discriminated against, such as race, religion, sex, etc.Unfortunately for you there is no law that says what type of flooring a unit needs to have.

Is there a niche for renting  C and D class properties to sex offenders?  

It's illegal to lie about investment products in the civilized world down under :-) You know Dean I agree on D class always have always will.. but again to be fair and balanced.. in the early days.the SPRUIKERS from  NZ and AU those guys that lived there and marketed these properties in conjunction with US based companies were some of the worst profiteers I have ever seen.. make no mistake it was both Kiwi and Aussie based companies taking a big wack out of this stuff and the US guys..