My first thoughts regarding my proposed niche and strategy are to BRRRR single or multi-family houses.

I was thinking of talking to the occupant,and assuming they are indeed the previous owner, explaining that I am considering purchasing the property and proposing a cash for keys scenario once I close.

I don't think what you are proposing is a good idea, I would just do a regular purchase from him and not try to refinance later.

You will tend to see tax credits and legislation that favors the resident. 

The seller has requested a 21 day mortgage contingency on the offer that I originally proposed as a 30-day conventional loan.  

There are two tax implications involved in what you propose.  

If I would rent to them I was considering proposing the following. 

The owner did not have a problem with it, however her attorney did and sent me an eight page proposed contract.

@Benjamin PekarekMy typical deal structure involves selling units/shares to an LLC then passing through all taxable gains & depreciation losses to the investors via K-1's like you are proposing in your original post.

State construction defects legislative reform has failed so localities do it themselves.