But my monthly income, even with the 2nd job, still makes it hard to save adequately for my first investment.

So the property owner must make sure they are aware of & are complying with all regulations related to their vacation rental property.It sounds like your neighbor did not conduct adequate research before offering their property for rent on the short-term market or else there were other factors involved which allowed the City to shut down the practice in your neighborhood.

By nature, they're young and ambitious, but probably lack experience.

Naturally we were excited.After entering the contract, we asked our real estate agent whether there are any HOA caps on number of rental units in the property.

First you need some basic business consultation and you can get free advice from SCORE, google that and follow from there, probably have advisors near you.An LLC is sufficient to do anything any RE, the type of business structure has very little to do with the nature of business conducted, as a small business your considerations should be based on tax matters, ease of adminitration, flexibility to conduct business, ability to obtain financing and insurance and lastly liability matters.

And owning rentals without adequate cash reserves, six months rent, IMHO, is very risky.

That's the nature of short sales they take anywhere from 4-8 months usually.

Regarding the 50% rule (and note that 38% will be adequate if you entirely self manage, saving 10% PM and 2% average leasing fees), and what others you know are stating they've experienced: Unless they've really crunched the numbers, I don't think most people really know the percentages, and will guess on the low side.It's not as simple as going to the tax return and taking a look.

Besides the natural damages, vacation rentals can incur higher wear and tear damage from different people moving in and out all the time.

If you failed to make good on the recourse nature of the deal, they could go after the property, and 50% provides a a good buffer for additional costs in getting the money back.Hope selling is made a little clearer