Alternatively, you could work with a realtor; by providing value and building good rapport, you might get access to pocket listings.

I still have to see what's happening with utilities, but right now it would cashflow anywhere from $150-$300 (depending on the loan type and DP we select) with a CoC ROI between 9.9%-10.8% (lower than some other options we're looking at, but it already has tenants...)Thoughts?

We use booking.com and it has provided some bookings for us. 

Property is exempt from STR permitting because the jurisdiction considers it to be a commercial lodging establishment.We've been pursuing an SBA 504 loan for it, which was going well until we discovered that the sellers have operated it only part-time the last 12 years -- intentionally blocking 60% of available room-nights because they just weren't up for running it full time in their retirement. 

There's a turnkey provider with 5% down, 2 year balloon payments.

The LLC is the new owner of the property so a policy that is just in your name is not providing any coverage.  

This way we could even do some sort of hybrid seller finance until loan assumes kind of deal, or am I just completely wrong in all of this?

Also, you're able to keep the loan current if you're planning to keep the seller's name on the mortgage until it's paid off.

What if your loan has higher costs than you were thinking? 

FHA loans are generally assumable.