@Matt Holley you haven't told  us what the value is versus what you paid for it.A refinance will only allow you to tap up to 80% of the property value after 6 months.Not aware of any lenders that will give you a 2nd mortgage or HELOC to tap the remaining 20%.Also, would advise againsti it - even if you could find someone to lend!

We are aware that Blowing Rock, Boone and Banner Elk have regulations so we are hoping to find a lot that is outside of their regulations but close enough to allow STR's. 

If your CPA has not mentioned the deduction, they may not be aware of it.

Be aware though, that some jurisdictions make it near impossible to get a retro-active permit.....but it's worth pursuing because my experience is that you so get more value per SF if the living space areas are permitted properly..... 

As you're well aware, short term property management is inherently challenging.

I am aware of hard money loans and seller financing.

Were you aware of them planning to move these people in prior to signing a lease?

As a newbie landlord, what should I be aware of that I am not thinking about in entertaining this request.

To be fair, I have not heard anything for about a year so I am fully aware that things can change drastically in that timeframe.

While this is a violation of the covenants of the deed of trust or mortgage instrument, and theoretically (if the note holder becomes aware) the note holder can accelerate (demand full payment) of the note, in practice this rarely happens.However, there are risks for both the buyer and seller in a subject to transaction.