Any advise as we proceed?

It's usually advised not to wait until the last minute to get a property under contract to avoid these situations.Did your client speak with the intermediary about the situation?

I need to go back to the drawing board to figure out where I can generate a minimum down payment for an owner-occupy property.

We have a great friend that runs his fathers 3rd generation wrecking yard & he's a member of the country club we attend.

In underwriting, credit is only a small part of how we assess who and how to lend to someone, you would be well advised to use a similar method. 

To be honest I'm not very familiar with TurboTax, but if answering Yes to that question automatically generates a Schedule E for that property, you should answer it No. 

I am interested in learning a little of everything about real estate investing and my goal is to build a bountiful portfolio that will generate a comfortable life for me and my family as I know this is attainable if I put in the work.

Renting out a $1M property once you leave it is not going to generate any cash flow for you.Take your $300k and invest it in rental properties out of state and use that cash flow to pay for your rent or to quit working your day job and move someone cheap!

With that being said, based on what I have been advised for my own situation as a landlord, as well as my own research on the subject, I do NOT have to issue 1099's - even if I pay one of my contractors over $600.

I agree with the advise above - DON"T QUIT THAT JOB.