Since this is my first time being a landlord and my tenant will be living in such close quarters, I anticipate hiccups and for that reasons and others I had decided to rent the studio to a family member to work out some unseen kinks of this type of rental.

They can still acquire the same replacement property if the deadlines all work out as needed. 

If it does not work out there will be another renter. 

I reflected it later on, I fell lucky it didn't work out.

Ultimately it feels like just something the tenant needs to work out with their neighbors until the city sees enough evidence to issue a citation and a judge to rule against them.

Find the person you like and trust and work out pricing for the different types of needs you may have (maintenance emergency, scheduled maintenance, guest noise complaint etc.), then you are set.

I am sure it will work out!

You might be able to work out a loan through them, but I find cash works best.  

But, what if the numbers don't work out and you are OK putting $500 into unit per month?

If it does not work out, then look for another property.Goodluck