When someone is exploring where to dump a ton of money, it would be smart to explore all options...not just the city with the best weather and tacos :-)

They also assume the rent-by-room option is the best way to go because they can get multiple nurses to share a home so they want to buy a larger home, thinking they'll rent out all of the rooms and make more money.

You have a few options here.

That's a perfectly good option if you're up for it.Remember that the goal of a house hack doesn't need to be to 'eliminate' housing cost entirely. 

So the only option is to pay in full and then buy the house, which makes the price way up.

Even wholesaling is an option... though I'm considerably more leery of that one. 

Two options I see as a landlord 1) If lease has been violated, eviction notice could be sent. 2) Request a new lease be signed due to new terms (whatever I decide they may be) and then not approve the adult child to be added.Has anyone else dealt with a similar issue or have a recommendation?

That's typically not an option.  

Is Private equity buy out or REITs a feasible option..etc?

No need to guess fnma makes guidelines available to everyone. https://selling-guide.fanniemae.com/Selling-Guide/Originatio...Do It Yourself” OptionThe “Do It Yourself” option is available for renovations made to one-unit properties by the borrower.