Interesting that this seems to cover all property zoned residential, with no apparent carve out for a transaction of residential property between two investors.  

That's Property Management 101.If your PM didn't have this lined up and didn't make you aware of this limitation upfront, that's a red flag.

This negative equity position is one of many reasons that adding ADUs in a single family zone is not typically a good RE investment.OP whatever you decide to invest in, make sure you do thorough and conservative underwriting. good luck You’re right in that the level of underwriting I presented wasn’t institutional level - but for your average person just starting out, institutional grade analysis often makes the thought of investing overwhelming.

Get out of your comfort zone.

Real estate for the last four years was betting on red or black but the ball was fixed to win as it was nearly impossible to lose.

The fact that their documentation is not clear and they are in a hurry to move is a big red flag.

I find myself selling stuck in the gray-zone of $160-$180/mo.

Zoning changes might be easy in your town because it's small, but you have to realize that the overall goal of zoning is that there are zones for certain things.

It reminds me of the “ Cutting the red tape for the rebuilding period.”

It seems like every city, county, and state has its own rules, permits, and tax requirements for short-term rentals, and I’m finding it overwhelming to navigate all the different layers of compliance.For example, some places require business licenses, transient occupancy tax permits, or even special zoning approvals.