A non-resident alien investing in the US adds wrinkles to tax compliance not encountered with your plain "vanilla" US citizen or resident alien tax return. 

Can we Non Resident Aliens use Standard Deduction now, as it is the only one left and in theory it should group the old Personal Exemption?

The resident is on a month to month lease.

I totally agree you don't need a LLC at this stage in the game.LLCs are useful in Hawaii in avoiding the HARPTA (5% withholding when you sell a property as an out-of-state resident), provided the LLC is registered in the state of Hawaii.

I’ve been in the mortgage business since 2003 but never turned the corner into investing (aside from a failed primary residence attempt in 06 - perfect timing, I know).

I don't recall seeing anything limiting the number of residents, other than a square footage per person requirement. 

As the lender, you should call the insurance company at closing to confirm this coverage.If he has a simple homeowners policy, like what we all have on our personal residences, he and you are likely not covered and it is possible the insurance company has what they need to deny the claim.

that's how I felt about our first home purchase for our primary residence. 

My primary residence has a unique feature in that it has come with a 20x40ft double-wide manufactured home in the backyard.Previous owner was using it as a shop but it has wood panel walls and beat to hell 50 year old carpet. 

The answer is turnover costs (different than repairs, vacancy, etc). 60k houses rent to C/C+ residents.