Usually when a landlord cannot find qualified tenants but are getting a fair amount of inquiries there's an underlying real estate problem and the qualified tenants simply do not want to live in that location.

Your personal loan has a 5 year balloon period.  

Stop reading if you want.2) I couldn’t guess what “There is a 6 months of grace period before interest payment begins” means.3) They call their $3555 charge a “Loan Fee,” stated a few lines up as 2%. 2% of $235,000 (loan amount) is $4470.4) Do you seriously believe the loan fee, “… IS 100% REFUNDABLE IF THERE IS ANY DEFAULT FROM THEPART OF THE LENDER OR IF THE BORROWER CHOOSES TO TERMINATE THE LOAN.”5) It’s okay to pay an appraiser directly.

I'm a Realtor with a couple properties listed in Boise, ID and a neighboring town for my investor/client that are currently rented as co-living or rent-by-the-room and getting killer income. (7.3% - 9.5% Cap rate) So far, every inquiry has been baffled by the concept of co-living or rent-by-the-room and immediately ask if they're being run as a halfway-house (which they are not).

If I got a home equity loan for Property 1 and used the proceeds as downpayment for Property 2 and then got a 2nd loan for the remaining 75% purchase price for Property 2, when I sell Property 2, can I use the Property 1 loan as part of the cost basis for computing Property 2 capital gains?

I doubt he'll be able to quality for a loan (VA) with just his income. 

Unlike a mortgage the interest on your loan will not be tax deductible.

Quote from @Juan Ruben Cortez: I believe the funding fee is 0.5% of the remaining loan balance, plus maybe another $500 - $1,000 in lender fees. 

If the lender is licensed in the state you're buying in, then they can do the loan.

Its a tiny loan for any institution.You'll have to get hard bids from a local GC, but maybe $110/ft?