The city says we are grandfathered in.

I would think a lender views the STR as a higher risk simply because a long-term tenant has a defined lease in place, that is usually 6 months or more in duration.

It is in an up and coming area so my thought is that if it doesn't have the activity that we are looking for while trying to sell it, we would purchase it ourselves buying it from my dad/the Trust and then renting it out. 

I am lost on which avenue to take from the options of house hacking, buy and hold (short-term rental), buy and hold (mid-term rental), buy and hold (long-term rental), BRRRR, flipping, etc.

We are negotiating the price with no brokers, which I love.   

While slightly more “boring”, with the amount of money you have to work with you could probably finance 4-6 $200,000 rentals and generate monthly income that could go a long way towards replacing / supplementing  a descent portion of your W2 income. 

We'd get a CONH and all of the tenants are long term tenants. 

The other advantage the California investors have is that their equity goes a long way in another area.  

That's a long time, but what's the average DOM for similar properties in your market? 

As long as your applicant is approved through your housing authority to pay what you advertised your unit for and as long as you don’t broker a side deal after the HAP contract is signed for additional rent you are OK to proceed.