I've had a couple of bad actors, but all in all I've had good experiences and continue to provide this type of housing.   

That sounds pretty straightforward and we've got something similar here too and it's not bad. 

Because significantly less than 100% of your investment actually goes into purchasing or improving the property, and the property is purchased at retail value (or worse), your returns will badly lag any benchmark of direct property investment.  2.

I can buy investment RE but due to crazy bad DTI (far worse than 100 to 1, possibly approaching 500 to 1), I cannot get reasonable financing on an OO and not sure my co-sign will help on conventional financing.  

A lot of the creative financing is paired with bad real estate or a bad purchase price but the buyer is hyper focused on the creative financing terms and that's prioritized over the real estate. 

Lending on mortgages.. buying bad paper.. new builds ? 

I think there is a weird balance here, among professionals, where people may not want to bad mouth fellow professionals, particularly from the same areas, which can create a skewed picture. 

I would pass on this deal given the red flags you share (and the fact you feel there are red flags is generally a bad sign).

I'm not a tax expert and dont know how this would conflict with the tax deferred basis, but if doable, this isnt a bad option, either. 

After arrival they're disappointed to find it's not a private bedroom, which leads to disgruntled guests that search for way to get a refund and leave bad reviews.