Interesting - the market in Huntsville right now has not slowed down at all;  in fact, I would argue it is even crazier than it was 3 months ago, and is now virtually impossible to find a property to cash flow unless you go to C/D neighborhoods or go in areas that typically have zero appreciation (outside of Huntsville and Madison city limits).    

We have found that people tend to be honest (so far) --- and the maids can tell when they've exceeded the limit.  

Some wrong info here...Good explanation here https://www.kitces.com/blog/limits-to-converting-rental-property-into-a-primary-residence-to-plan-for-irc-section-121-capital-gains-exclusion/

This may limit your options, since no one is going to be able to move in with the tenant in place.

Generally his limited time was on units that were years past due, but he was prioritized to foreclose on the lowest priced maintenance fees of the developers units with unpaid maintenance fees, moving on to the higher prices ones last. 

If I were the buyer interested in this property as an investment, my max would be about $65k, based on the limited information that he has given here.

It’s too easy for the applicant to stop payment or to have the check bounce after you’ve already given them possession, and then you’re stuck with a tenant who’s paid you nothing and you’d have to go through the full eviction process to remove. 

I think he won't let us do this if we can't limit our risk on the variable rate to some degree.  

That is going to put a practical limit on what you can charge and expect to keep them.

I have read about some cities limiting the maximum unrelated renters.