I, too, have worked with a very successful physician/investor, who formed an S-corp to hold all of his investments in the chance he was subject to a malpractice suit.  

They are subject to a credit, criminal, and eviction check just like other perspective tenant candidates.One thing I would suggest is asking them how much their subsidy is for.  

But it's worth asking the bank (you will need to explain why the appraisal is garbage very persuasively).3) Refinance with another bank.

Thank you @Greg O'BrienI found this one, not sure if is the one you are talking about but it specifically says that not because a rental is considered active it means that it is subject to Self Employment tax: Memo 202151005

He specifically mentions ”make sure you do not provide substantial services so that you report the STR rental income on schedule E not C and so you are not subject to 15% self employment tax“

Seek out some of the top active Realtors in the Subject's market area and ask them.

If there's a hole, it may be a red flag.b) sensitivity analysis: I examine all the assumptions, and make sure I can live with the worst case scenarios.c) "Stall and see": if they are getting money over multiple years, and there is no penalty for investing later, I would usually wait so I get some real performance data, versus having to look at theoretical pro forma information.d) Recession stress test: I will not invest in anything, until I subject it to recession level stress and see if I can live with the result.

Hi Matthew, checkout this post i just did on this subject: https://www.biggerpockets.com/forums/617/topics/1161394-call...

If the new property has less of either asset class (1245 or 1250) then the difference is subject to tax at the rates mentioned above. 

In other words, did the appraiser not include any relevant comparables and/or data/facts, that would be better support for the Subject in the market.