I'm open to all suggestions and ideas!

However, what if you prefer simplicity, limited risk, and are living off of the income? 

When faced with scenarios like this, it's tough to answer such a specific question with limited information. 

My tenant never responded to the notice and won't respond to me at all so I have no idea what will happen.

A partnership requires three things to be successful - Experience, Capital and Time.It looks like you have the capital and experience but maybe not the time.I have my doubts about this working if you have a friend who has weak credit and a limited cash flow.

Dwelling/Fire policies require that you request a limit for contents.3.

You have an idea that you want to promote.  

Check their nightly rate, occupancy and amenities.That will give you a pretty good idea of need and profitability.

Any ideas on how to get access to the $1M?

Quote from @Victor Yang: If I gift a house, what amount will go towards the lifetime gift limit, the amount i purchased the house for, or the current FMV?