However, I forgo the $20k lump sum which might be helpful down the road.OPTION #2B: Quick audible on option #2 as I could do 80%LTV and drop to a 15 year mortgage only increasing my current payment $50 or so a month.

The best situation is one tenant is in charge, charge the others a fixed amount including utilities, and forgo arguments.

Check with your attorney to see if leaving your name on the homeowners will work to defeat the reason for going to the LLC (to protect your assets).Some Insurance carriers will not do a personal policy on an LLC (not that many but still some).

Like that old song, you can't always get what you want.

I think second the point by @Bob Woelfel:"The goal of what you are trying to accomplish has to be bigger or feel better"There has to be a 'carrot' that is enticing enough to you that if you focus on it you are willing to forgo other luxuries.  

I am beginning to wonder if this would be a great option to forgo some of these expenses and list this for STR? 

Tell him for go stay at aunties', if no get, tough beans brah!

I could simply offer to manage the property for them, but I'm willing to forgo short-term revenue and cashflow for long-term equity and wealth building.Value-adds:Here are the three major things I think I bring to the table that other investors (especially those not focused on this niche of the market) don't have:Acquisition: Access to off-market vacation-rental-approved properties at below-market ratesSet-up: Expertise with navigating the necessary licensing, connections to furnish properties quickly and extremely affordablyOperation: Successful (and proven) management (above-market revenue and occupancy--high reviews, fast response time, competitive rates, etc.)I would thus definitely say I bring value to the table. 

Even then meeting 1% rule is still unlikely.Do most Canadian investors forgo the 1% rule, put down 25%+ DP, and tweak operating costs to make positive cash flow?

But, that is the reason for going to them, for the nonconforming loan.