TLDR, that loan originator, X years ago, had a loan denied b/c someone was buying a 2-4 unit property within 50 miles of their current primary, and they don't do a lot in this space, so they think it's a hard/fast rule, when it's not.Reality: assuming you don't need to count rental income from your departing unit, and assuming that owner occupancy makes sense (more on this in a bit), you will be fine.

As you know, you won't get the same amount of interest right now compared to the spring and summer months, so you could easily do a 4-6 month lease to start with the new tenant, and then raise the rents to market or re-rent it during the prime rental months of April-August when there are way more people looking to move. 2) I wouldn't let your place sit vacant since it sounds like a wonderful home, and there is still a lot of demand for rentals, especially detached single family homes.3) Most travel nurses rent studios and one bedroom type places/basement apartments since they don't need all that space, but it wouldn't be that impossible to find 4 travel nurses, maybe a little more work on your part.  

I would love to put him in touch with an agent or two on the island who understand this space well.

I've been in the same space and I totally understand.

This is likely to be a disallowed use in most residential zones.Identify prospectives tenants that see value in 2 separate living spaces on a single lease at a premium price.

The existing space is small and I'd like to repurpose the area. 

As long as its space within your primary dwelling unit you still qualify for 121 exclusion (vs. if you were renting 1/2 of a duplex it would impact it)Whether in your name (sole prop) or a SMLLC- there will be no difference ont ax savings or on your 121 exclusion. 

If you're interested in learning more about apartment investing, or if you want to network with people in that space, consider attending the Fire Summit in 2021.

Property is near Space Center Blvd.

In addition, a separate living space/500 sq ft area that was built in hopes to convert to an ADU that the former owner never got around to.