They loved it because they got some play money right away and steady income each month without having to deal with toilets and tenants.

You need to remember that, hopefully, this is a long-term play for you, so work with a trusted STR designer (I have great recommendations), and spend the money upfront so you can be the most successful in your area.

We could also play the present value to who game?

Well I have seen this come into play - I had someone who has a note in florida that was a non-owner occupied loan and the lender claims the borrower failed to make payments on this and attempted to record the deed in lieu.

As a true south philly guy the neighborhood identities are different and bias may be at play but if you start looking into comps you would be surprised.

I know real estate is a long term play but you never know when you'll need access to that capital.There are turnkey companies out there that handle the entire process for you from top to bottom so it makes for an extremely passive investment.

I tell everyone this, New York is one of the hidden gems of investing if you know how to play the New York game.

Down payment amount varies and more you put down the highre you will be in the queue of applicants, also down payment varies per your credit...Dodd Frank IS in play!!

Turning a "SFR 3bed / 2bath with a bonus room" , into a 4 bed / 2 bath with the simple addition of a closet, is one of my favorite value add plays. 

If your tenant has been playing these "schemes" then likely they've done this with the previous landlord and gotten away with it - so I hope you bought the property for a good price in order to account for this potential headache.