Make her clean it up, you need to take pride in your own property.

No such thing as a “short sale lender”.....you’re getting a regular traditional mtg based solely on your credit/income and the subject property appraisal.....doesn’t matter if it is a regular, REO or short sale.

I think a big part of the problem is that as a fireman a large portion of pay is above my regular salary, I had this same problem w/ the first morgage on my home.

I get to stay in the business and do the fun part (finding good deals), am not dealing with clients directly, and still get to make a bit of cash on the side (note: I still have a regular 9-5).Anyway, I was wondering if there are pitfalls I should look out for before moving forward. 

I would be inclined to keep renting to them, but have several inspections per year to make sure things are getting worse and try to get them to clean up their act some and address the extra cat.You could make it a requirement that they clean up their mess (or at least organize it) before you will renew their lease.

So I have regular contact with architects and obviously other engineers.

Keep in mind you will have cleaning fees in your expense column, but those should also be included in your income column in addition to your nightly rate. 

We can go to court, if that's what they want to do, and this appraiser is regularly testifying in court (most appraisers won't).

is it used regularly and is a safe way to enter a partnership with another investor?

I'd love to hear some opinions, especially from realtors who walk staged and unstaged houses with clients regularly or flippers/sellers who have tried this method.