I know people do long distance STR, but A) I bet there are lots of restrictions against those in Hawaii condos, and B) long distance would not be my preferred way to start doing STR....not by a long shot.If you can't qualify, find out why you can't qualify. 

Though I guess we can keep the rental property in our own names and then I can raise my umbrella insurance up to $2-$3m to be safe. 

REI is all about taking risks, and since you only have enough capital to try out one strategy right now (perfectly normal for someone starting out - no, you're not behind the curve) then I would start with your safest bet that is going to make you more profitable in the long run, either with knowledge or cash flow... ideally both!

We have not heard from the hotel and conference venue yet specifically, however, we've heard from relatives of some of our team members who are safe and said the damage is less than expected thanks to the floor protection systems installed post-Katrina. 

Their parents are very involved and they love our safe location and renovated units.Because they are outside they love and take advantage of our parks, beaches, town and public transportation...Never an issue with rent (but that has been the case with all of my tenants), and they absorb increases in stride.

Is that a safe area to invest in?

A few years ago I would have said convert it to a rental, but it's not the sure bet it used to be when 25% of our tenants are refusing to pay rent. 

at least here in Florida on the second page it has a check box that establishes that unless the box is check , seller must deliver property free of tenants ,  and occupants and future tenancies..See if you have something similar on your contract and if you left it blank then your are safe and can fight that back.

I guess with all these info on hand, i can pretty much conclude and safe to assume that i should expect cash flow starting year 3 and above?

I bet you can.