That's the trigger for a 1031 exchange. 

Hi @Sunil Kumar -1) Yes, I'd highly recommend you have the property checked - in addition to termites, the inspector will also be looking for dry rot, fungus and signs of other wood destroying pests.  

If you haven't spoken to someone at the planning office, that's the best place to start. (2) It will be hard to estimate costs for construction until you understand what the change of use will trigger; here in Oakland/CA it triggers structural upgrades, fire upgrades, electrical, etc.

They do seem to be scared to death that the Buyer is a wholesaler and will leave them high and dry.

I don't know of a cut and dry rule for this, so it seems worth the time to make a few calls and see if you can find a more "investor friendly" lender. 

In addition to Jim's advice, I recommend scheduling a move-out pre-inspection walkthrough maybe a week before move-out for several reasons: 1) you can document all items needing repair and give the tenant opportunity to repair any damage instead of you deducting from their deposit and arranging the damage repairs yourself 2) anything that is normal wear and tear, you can begin to schedule painter, contractor, cleaners to come through and do a move-out punch list and cleaning the day after the move-out to expedite the turn and know exactly what needs to be done in advance of your new tenants. coordinating several trades means they all might not be able to come at the same time to allow paint to dry for example but it gives you a leg up on the process.

My wife and I are finally ready to pull the trigger and execute on the business plan that we have developed which is based on applying the BRRRR strategy to short term vacation rentals (AirBnB) in Puerto Rico! 

You have to learn the basics, and once you feel ready don't be scared to pull the trigger. 

For anyone reading this who is sitting on the sidelines, just find a deal and pull the trigger already.

-Pay close attention to property taxes, and whether sale triggers reassessment.