Ignoring the internal revenue code, the judge-made-law substance-over-form doctrine and sham-transaction doctrine might also stand in your way.But FWIW, you'll only have to "logic" your way out of it if you're examined or audited. 

(This is someone I know, I'm not looking to short change this person on the deal, I'd like to provide an industry standard rate of return)What type of contractual documents should I have drawn up for this?

Would it be a smarter decision to intern for an agency for a few months before working as an agent for a firm?

Arlington county has relaxed its standards for accessory dwelling units (https://housing.arlingtonva.us/plans-reports/accessory-dwelling-ordinance-update/).

One of my internal challenges is I have a hard time beating the drum and ringing the bell and singing my success  in order to attract private money lenders.

While I would be cautious here given how things developed, I would think that if you have done all of the relevant background research on the original applicant and he met your criteria (3x the rent plus the stuff I mentioned above - you'll need standards so you can treat everybody the same) then it wouldn't matter if he added someone else as his income and credibility should sufficiently cover.

I'm sure this topic has been covered a thousand times before, but wanted to refresh the topic.The way we operate we require a standard 12 month lease on move in and our leases all automatically convert to month-to-month leases at the one year mark once this 12 month term is fulfilled.

I'm not looking to do granite countertops, just a standard rehab for a place that's appropriate for a lower income neighborhood, so a luxury rehab is inappropriate.Thanks!

While Vacancy will be fairly steady based on the state/area you're looking in and Property Mgmt. will be fairly standard as well, you can and should modify your allocations for Repair/Maintenance as well as CapEx based on the age and condition of the property you're analyzing. 

My guess is that within the next decade or two all new construction - commercial and residential - will have to comply with "green" standards.