This would significantly help my ability to afford the market from a house hack standpoint, but I want to understand what those tax advantages are renting out my basement as a business rental.

The only use case I know of for SBA-backed loans to finance real estate is when a non-RE business owner-occupies at least 51% of the property, such as an attorney firm buying the office building where their office is and leasing out the units they don't use. 

Quote from @Bradley Hendrix: That is a long post, but it's what people need to hear.

More people are wanting to get into the STR game and if an area doesn't have enough guests to support more and more competition, I can see this happening.Good job on recognizing the trend and getting out while house prices are still high in the area.

Go to networking events, join every investor's Facebook group, and connect with the wholesalers who are sending deals through the group.I do business in Florida, feel free to reach out with any questions about wholesaling and flipping. 

But sometimes you have to look at it from purely rational and business perspective.

I was referred to Hostaway by some people who have had a great experience with it.

As of now I am looking for any advice on what I should be doing to prepare for this transition and how people have successfully managed room sharing properties.

It's a small town (I think 30,000 people) that's likely going to be difficult to find reliable PM's, tradespeople, etc. 

They are generally conceived as bad, with exceptions to people having nightmares, but most of that likely has to do with bad screening.