I'm chatting with
a guy who has a 5/2 SF home in the Tampa Bay area and he's renting out
5 rooms on a month-to-month basis. He doesn't want the hassle of doing
that anymore, but selling his property will be a ch...

The seller is willing to finance 50% of the cost and defer payments for 5 years.

I know people that have used non-Lifestyles realtors for SF and MF properties.

He might  consider  selling to you and saving some funds in his  bank and  using a reverse mortgage to  purchase the proeprty .   2)  for your side -if you need to keep the down payment low - using the  VA loan is a great idea ...already having a VA loan outstanding you might have an issue  using another VA loan . 

Instead of denying them, can we refer them directly over to the owner for them to sign a lease with the owner who is willing to effectively manage the contract, payment and relationship BUT would still want to retain us (albeit for a lower fee) to deliver ONLY guest and property care activities (guest communications, organizing cleaning, lawn and pool care etc). 

They also have monthly mortgage insurance on the payment. 

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years.

Any advice on the pros and cons of using the HELOC/HEL and purchasing outright or only using for a large down payment? 

These are mainly meant for first-time investors with low reserves, and you end up making a much lower profit margin due to the extremely high interest payments.  

Of course they have no issue with selling the liens and collecting money from investors, they also have no issues with charging a premium that is non refundable and the county keeping the money.