There are plenty of buyers out there who view the rules as mere guidelines as opposed to absolutes. 

This property is in really bad condition and needs extensive exterior and, presumably (boarded up - can't see inside), interior work to bring it up to move in condition. 

The owners have given me a tough price to work with as the exterior of the home is very unique in the stone work which causes many people shy away all together.

If we spray water on the exterior, it leaks through on to the interior floor.  

Not to say I wouldn't be opposed but would have to eventually.

You may want to place a dummy ad on craigslist and see what kind of response you get at $1600 and $1700, using exterior pics of your location and interior pics that are closest to how you will renovate.  

Would it potentially be better to raise the rent and keep them on a M2M lease opposed to making them sign a 8 month term?  

Specifically:"- there are deducible expenses allowed (e.g. utilities, advertising and legal costs, rates, and even interest and amortisation of the property)- there is a 60% deduction if the property is rented out as a dwelling (as opposed to a business)"I travel to London occasionally for work so I might follow up on your offer :) Let me know if you're ever in Barcelona.

If they new how easy it was to own in those neighborhoods I think many more tenants would opt for ownership (Sub $50K) opposed to simply settling for becoming renters.  

It depends on the HOA ByLaws.Some HOA cover roof, driveway, even some exterior features (A/C unit, porch, attic), some HOA don't even have reserve fund.