What zoning does that fall under?

If the market corrects and if your cash flowing then the sky is not falling.

If you are trying to wholesale it, don't. 95% chance you'll just end up keeping their home off the market fit 60-90 days, so they can't sell to a real buyer, then the deals falls apart because you find a buyer, your double close doesn't work (no assignments allowed), etc, etc.

I would have all my docs. run by the attorney, plus have an escrow company for collecting rent and paying the existing mortgage (be sure r.e. taxes are included with that payment also) so it doesn't fall into foreclosure.

If they were the victims here and paid a fee to rent here, then they should be able to supply a lease agreement and a cancelled check.Next I would get any contact info you can of the phony property manager who rented it and then send them a message from the victims asking if the PM has any other properties in the area because their cousin wants to move close to them as well.

So it falls outside of Fannie/Freddie.  

Cuyahoga Falls is a half way point between the two universities and one of those cities that everyone wants to live in.

This one would fall into the 'you never know' department.

They are (or were) friends and now are having a falling out.  

They fall short of understanding what they're getting involved with.