could be non conforming use.... so banks wont go on it.but if I read you correctly he is paying 150k for the whole thing and putting 100k down and wants a mortgage for 50k ???

You have to basically convince the city planning commission that your development is in conformance with the plans of the area.  

Be wary of non-conforming units in a purchase — might be illegal to have tenants staying there AND you have to pay them to leave…a ridic double whammyCDP didn’t use GC for garage, was able to save margin thereBuy own toilets, usually have crazy markupReceived credit for trees interfering with sewer line during inspection, but didn’t use in closing negotiation, although totally could have

Conforming loans aren't an option due to my self employment income and current primary mortgage payment.  

Every bank will only touch the property if it is a conforming loan, or if I liquid assets equal or greater than the re-finance.  

I like the corporate lodging site mentioned and will also look into that.In terms of Hawaii regulations, to legally do a short-term rental you would need a non-conform use license, which hasn't been issued since the 80's (you can thank greedy hotel lobbyists for that).

The 97% financing are conventional conforming products from FannieMae and Freddie Mac designed for First-time homebuyers.

A HML will get you done in less than 30 days, conforming 45-90 days and it could even be longer for a more conventional lender.

Also on a side note the new loan levels for Orange County Jumbo Conforming is 637K and you would be getting close to that number.  

Also, if the building was previously a triplex and registered as such, you may have legal non conforming rights (grandfathered rule) to continue to operate the property as a triplex.