Our initial goal for the second unit was to convert this to a short term vacation rental, but now we are questioning this option.Is anyone familiar with this form, any possible exceptions, and/or legal implications?  

All units will be vacant when we purchase next month except one.

None of my deals are on MLS, except a few foreclosures I've purchased because I get daily report of all the new foreclosures added to MLS that fit my criteria.

Also see public records to obtain the starting mortgage, and the remaining balance, that will be the price the bank excepts. 

The current tenant has been in the property for more than 10 years, has never had a single late payment, and keeps the property in exceptional condition. 

Here are the stats:Summerville, SC, 1790 sq ft, built in 2001, asking between $200-$220k (seems about right as Zillow says the price would be about $202k)Has not been updated at all except for a new water heater.  

If it is set up that the client receives membership interest or shares in an entity that owns real estate then that would not qualify.The exception (sort of) to this are specifically syndicated products that are sold as securities and set up so that client does receive a tenant in common interest in the underlying real estate asset.  

This way he has to do very little except cut the check, sign the paperwork for the mortgage (issued from him to the LLC) and cash a check once a month.

I'm talking about buying the house at a discount, and renting it to him for about what he pays now for a mortgage.. except this way he will walk away with $50,000 to pay off bills and maybe take a trip.., we would be doing him a favor, but I would also be getting a great deal on a house we could later rehab ( causing forced equity) and rent ( cash flow).. yay?

Some exceptions could be tax liens, municipal liens and whatever liens in your jurisdiction have Super priority over first lien mortgages.