Strict lending guidelines and low rates don't equate to a crash like 2008.

Should I be more strict in what qualifies a potential investment?

Your grandfather, being strictly a funding member and not hands on with the investment, would be a limited partner.

Legacy tenants are risky, and vetting new ones will be a strict process.

the most highly regulated note and you need to be really up to speed on all the laws that pertain to those.you have commercial paper  NON owner occ.. not much in govmit rules so it comes down to the collateral and the borrower you have first position and second postion.. rates of return on these can vary greatly you want to know the difference.

PS has so many regulations on STR which would limit our upside.

As you start your search, be sure to hire an experienced agent that is knowledgeable in their vacation rental market so they can guide you to areas with rental friendly regulations. 

My Rental strategy going forward is to rent strictly to section 8 tenants.

Regulations: some townships are starting to regulate STRs and they have very high requirements for the locations.

Or are you strictly looking turnkey?