Also, operating expenses like cleaning, or purchasing sheets, and towels are much cheaper.

It seems to be cheaper than a manager and plus they allow you first right of refusal whereas most property managers will choose who ever they want. 

There are several avenues to consider here, and I'm sure you can get her out but depending on the above answers it may be easier or harder, cheaper or more expensive.

Trick is to keep the per room rent slightly cheaper than a studio apartment rents.  

This is how you get the cheaper down payment. 

It will require Ca Fair Plan insurance which is not cheap but is likely cheaper than a free market would dictate.  

The midwest has an abundance of pockets that have great cash flow and the south is significantly cheaper, decent cash flow and good appreciation potential.  

Put a virtual potential call center at the front line to field calls and this feels like something that could be done cheaper than what appears to be $26/door/mo.

I think I can get this property for cheaper and I think I will need to in order to pay off the hard money lender with zero out of my pocket after I do a cash out refi 

But, in today's market, especially if you are not a builder already with your own teams, the cost to buy an existing property is often cheaper than constructing.But like Jaron noted, you have access to capital through some form of refi on inherited property, and that gives you options on how best to invest that money.