Establish an emergency fund and target stable long-term rentals or short-term rentals in markets you understand.House hacking or private lending can offer alternative entry points depending on your risk tolerance and hands-on involvement.

. $40k will not get you a non owner occupied San Diego property unless you find some unlikely alternate financing.

Alternatively, we can get a 15 year fixed at 5.25% with $8,800 closing costs.

There's very little way to go wrong here since the alternative is paying to live somewhere else anyway. 

But Incase they deny it or find other excuse to stall what would be alternatives?

In the alternative, everything seemingly goes well, he has lied on his application (very dumb move) which you don't control and down the road a year or two you get a "knock, knock" on the door from some very stern men who want to talk to you about the transaction.

If you're subject to the Alternative Minimum Tax (AMT), these deductions may be limited.

Being listed on multiple OTA allows users that use alternate OTAs to see your STR and could provide a higher ADR even if you end up lower ranked of the OTAs.Basically it comes down to having all your eggs in a single basket and is too risky for my liking.i am one of those STR owners that corrects anyone that refers to my STR or STR business as an AirBnB.  

I'm just hoping someone with actual knowledge of it can provide some information that offers an alternate explanation.

This is an alternative approach for newly constructed buildings.RESIDUAL ESTIMATION APPROACHThis approach determines the cost of short-lived assets, such as 5 or 7 year property and subtracts them from the total project cost.