They now require 24 hr care and he is trying to avoid selling his home to pay the $65k that is owed.

We require co-signer to be local and a real estate owner, so that in case of default we can lien their real estate.

Also, 6 months reserves is a great rule of thumb, and some lenders require that as proof as well.We do have an arrangement with Helix Mattresses where I can +/- 50% off retail with free shipping on all mattresses. 

Do you need a certain amount of cash flow, are renovations required, how many bedrooms, etc4)who’s your ideal tenant, if you’re renting out?

As a result, meeting the requirements to be considered  a real estate professional may proved to be difficult. 

If the city is ok with STR's, I then check to see what permits are required for STR operation.

If the property is tenant occupied, you should require your tenants to have renters policies and lastly and just as important as the insurance you obtain is knowing all vendors you rely upon to perform work at the property and on your behalf are properly insured.

Creditors and lenders are not required by law to report to credit bureaus.

You'll likely want to start with reviewing the requirements under Prop 19 for retention of the base assessed value when adding a child to title, and also look up the rules for a basis step-up at death. 

I would base this on your numbers, not sellers (seller financials are one of the biggest jokes of this industry), and your return requirements.