They've violated the lease, and the chances of them making a long-term change to become a decent tenant are slim. 

I would try not to tie up any of the principal in down payments.Personally, I had a family member do this same thing, but they used an investment portfolio as the collateral instead of real estate.If you play your cards right, this might be the only short-term money you ever need.Please let us know what you end up doing.

That way I wouldn't be subject to long term capital gains tax and save a decent chunk of change.Also, my understanding of gifts, in this case money, is that there is a yearly limit to how much you can give someone without having to fill out form 709.

It won't take much money to purchase something that makes sense.Use the remaining money to invest long-distance.

However, the opportunity cost is that I won't have funds to invest with my current salary as long as I have this house.

It's not hard, just takes a few minutes.Like I said above, I haven't been STR hosting for long.

Come to think of it, though, I can't imagine why they wouldn't let me perform one just to understand how much I can offer.  

When buildings like this do come up, it's usually placed on the MLS, but you're gonna need to keep an eye on the market for long stretches of time.

What should I do in the next 2 weeks to set myself up long term?

I think you're on the right track in terms of it's proximity to other MSA's.