I think I need to clear up a definition for you.

I think mid-term rentals are a great strategy for a house hack, if you're in a good mid-term rental market.

I do think focusing in on one path and one goal will help me succeed.

We do want to get the appropriate permit but I am thinking that will take a lot more time and additional expenses to have it all in order and we need to be able to refinance it since we are purchasing cash (we are having a hard time with a lender which we initially wanted to do a rental 30 year loan, but not sure if there will denied due to this non permitted alterations to the house). 

I think you would have to force appreciation via property improvements to see any appreciation gains.

Just think about the worst damage a tenant can cause, such being liable for setting your rental house on fire or burning down your rental house and the neighbor's house, etc.

I can never know for sure if the pipes or wiring was replaced (my biggest concern), I don't think an inspector can actually tell as well since you have to tear down the entire house.

I just finished listening to Norada Real Estate Investments' @Marco Santarelli discuss out-of-state investing at the Think Realty conference in Baltimore.  

I don't think cap rate for residential RE is necessarily the best metric, but I try and achieve a 10% minimum gross rent to purchase price figure, so a $300K property I am hoping to achieve a $30K/month gross income goal.

Definitely an interesting idea, but I think you have to either have some property management who has experience / knowledge with managing properties like this or some personal knowledge / experience running these types of properties.I also think there is good opportunities around college campuses like Kent State, Toledo, Baldwin Wallace and rent out per room to college students.