I'm assuming that this situation wouldn't pass inspection, but one could argue that all the spaces the guests have access to (i.e. bedroom, bathroom) are safe and habitable + the guests wouldn't be exposed to the kitchen.Also, do the city inspectors inspect other parts of the home the guests won't access (i.e. inspectors check the basement for water infiltration even though no guests would ever be living or even going down there). 

For lenders, I have access to private money lenders or if you want to go the traditional route, I recommend checking out Coast to Coast - Jeff Weller. 

Check out the Short-term and Vacation Rentals forum.

Feel free to send me a message.

Whether it applies or not it's always a good idea to check with a professional first so thanks for the reply.

If you want help structuring a scope of work or exploring different financing options, feel free to reach out—happy to offer insights!

I would check your state and local regulations. 

just double checked my lender is now 80% LTV for short term rentals only 85% for long term rentals

It’s tax free profits due to our tax code.

Of course the tenant doesn't want to pay, she's got a free ride.