Do they embrace STR and tourism, or are they generally adverse to it.I'd also check a couple of the STR websites to see if you can find other STR. 

If you deny them based on credit report findings, be sure to provide an Adverse Action Notice.Hell, when I get mortgages or refinances they run credit, ask for all forms of income, ask for my all bank statements, all investment account info, all properties with their lien information (if they're leveraged) and estimated values. 

Now you'll be invested with only small-time syndicators who have so much money tied up in deals they'll have few resources when things go wrong, will not be able to ride out adverse markets, will be forced to "do deals" just to keep their lights on, and might make decisions far adverse to your interests just because they are painted into a corner. 

In 1976, the Board became concerned about the increasing controversy as to the authority of a federal savings and loan association to exercise a "due-on-sale" clause - a contractual provision that permits the lender to declare the entire balance of a loan immediately due and payable if the property securing the loan is sold or otherwise transferred. 2 Specifically, [458 U.S. 141, 146] the Board felt that restrictions on a savings and loan's ability to accelerate a loan upon transfer of the security would have a number of adverse effects: (1) that "the financial security and stability of Federal associations would be endangered if . . . the security property is transferred to a person whose ability to repay the loan and properly maintain the property is inadequate"; (2) that "elimination of the due on sale clause will cause a substantial reduction of the cash flow and net income of Federal associations, and that to offset such losses it is likely that the associations will be forced to charge higher interest rates and loan charges on home loans generally"; and (3) that "elimination of the due on sale clause will restrict and impair the ability of Federal associations to sell their home loans in the secondary mortgage market, by making such loans unsalable or causing them to be sold at reduced prices, thereby reducing the flow of new funds for residential loans, which otherwise would be available." 41 Fed.

That leads to our question...I have an idea how adverse posession works, and believe ours would be a candidate.

But again, as you and other have mentioned, that is a matter that need to be discussed with your CPA and possibly your asset protection attorney to make sure that you are not weakening your structure nor creating adverse tax consequences. 

Having a strong mom provided lessons in over coming adversity.  

Now that property is fairly well protected from any adverse market events because there is no mortgage to have to cover. 

I would imagine that I would have to work with the city on such a project, in addition to coordinating with the current tenant base as to not adversely affect them.

Also consider the cost of eviction, vacancy and re-leasing the unit when taking any adverse action against tenants.