Other than that our experience and knowledge of the area is limited.

Typically in my (limited compared to yours) experience most issues come up shortly after moving in.

In our minds we would never want to buy commercial property that isn’t residential, but we also don’t want to suffer the loss of our coffee shop either.

How do I treat the long-term capital gain (or loss?)

If it's within an LLC, that limits that.

People will want the convenience of being able to walk to the beach with all their stuff vs. having to find a parking spot in the limited public parking areas. 

You can rent long term as a "Alojamento Local", which is what's usually used for Airbnbs and short term rentals, given the fact that you do not have an upper limit on the amount of times you can renew the service or the duration.

New loan in best case scenario at 4.25 will cost me 1600$ + my $1800 (lost with Wells) = 3400$ at 4.5 rate Sticking with Wells right now means $7145 in fees and 3.875 rate but if I sell this place in 10 years or pay it off faster than these losses I am having now will change.

My limited knowledge of RE investing has been pointing me to go to a hard money lender and get a loan, put some money into it, rent, refinance BRRRR.

My limited knowledge of RE investing has been pointing me to go to a hard money lender and get a loan, put some money into it, rent, refinance BRRRR.