Also worth noting...I don't know that I'd say DSCR rates are insane.

One thing to take into consideration is.. if you buy the property with an LLC your interest rates will be higher. 

Once we determine the rental value, we aim for a monthly payment to the seller at approximately 50% of the market rate.

The rate is the same or slightly higher but comes with a $9K discount per house.

Very high interest rates, Easy times to find deals with conventional loans and hard times and recently the housing bubble / crash.  

Love the time in the market piece because you'll hear so many people who have never bought investment real estate ask why "you're buying when rates are so high" etc. 

So I could satisfy the mortgage company that it is a second home for the superior rates by exceeding 14 days, while still satisfying the IRS that it is an investment property.Are you guys getting investment loans or second home loans for your AirBNBs?

Can anyone tell me what the current market cap rates are for Class C multifamily properties in Government Hill and Denver Heights? 

Her idea at present is going to be to purchase the house herself (using traditional financing - high interest rate) and make the payment affordable for the family's rent to cover by arranging the sale well below market value and putting up a down payment of 30+ % of her own money, resulting in a PITI of ~1500.

I would be very surprised if this was accurately done.That means you are cash-flow positive after depreciation of $1,666 per monthIf the return was filed, you may want to pay another accountant to look over the return to see that it was done correctly.Yes, buying another property, given today's condition of high prices and high interest rates would likely decrease your rental taxable income.