Talk with @Scott Smith for specialized advice on how to properly setup this.But, in short, you need insurance regardless, and you might want asset protection if you have cash flow and/or equity to protect.

My short-term debt has me feeling a bit uneasy. 

I can spot the college houses right off that bat that charge a premium towards college students.

The city will likely be the one to govern short term rental policy. 

To make a long story short, we have a lot in Woodinville, WA (outside Seattle) for sale.

And I think getting a short sale will be difficult, as you have to show all of your assets and a lot of banks won't agree to a short sale, if you have cash and other assets.

One Has to see the option agreement to see if it is still valid......short of that it’s a crap shoot.

Am I able to buy a house to live in it short term (few months maybe), and then later rent it out as an investment while I travel?

You have to weigh the upside and downside and compare that with your short term and long term goals.

We agreed to split the cost of the short notice with tenant (basically split 9 days of rent) as we were that eager to get rid of them.