@Kerry Noble Jr  I used to live in Indianapolis before moving to Georgia. 

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). 

She prefers they sell the house right now, as is, and live off their profit.

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.- The townhouse you're moving into is currently a rental, but you plan to live there two years for the 121 exclusion.

I'd sell every Cleveland house and put your money in a better market. just my 2 cents as someone from ohio and who lived in columbus for 12 years

You can't rent out a PO box and live there.And yea that sounds like a huge red flag to me. 

I live in a community where half the people never lock their doors.

This happened while a tenant was living there.

I used to live in Bellevue, when I started investing in Cleveland area, I also went for BRRRR, I was a newbie, and it was hard to pull off.