Its doubtful that the municipalities involved would sign off on a condo conversion or subdivision, as their aren't many rentals in the area.

What methods do other private money lenders use to pass along servicing fees to the investors involved?

Cash flow can be great if you manage it well and keep occupancy rates high, but factor in the added costs of management, cleaning, and potential vacancy dips.

CA really cleaned up the fractional note business from my days of doing it in the 80s..

It's just not a subclass I want to be involved in, but perhaps you can make it work for you! 

It is entirely possible to self-manage with a strong cleaning team.

It's better to be honest with your current lender and all parties involved in the transaction, than to risk losing your EMD and falling out with lender Bs false promises.

I am VERY involved in all aspects of my business...and, although I trust, I also know how everything is done and verify most things.

Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers.

If they fail to comply, you may need to involve legal counsel or contact your state’s real estate commission.Hire a Reliable Manager: Finding a professional, responsive property manager is key.