It sounds like you have spoken with an architect but it's not really clear to me what you believe you can build or renovate by right based on the current zoning and existing structure.  

I’ve spoken to other investors in the area and I am aware of the average nightly prices for similar rentals based on the seasons.

Based on my calculations, this would lead to cashflows around $700 per month.I am now looking more into FHA loans and wondering if that would be a better idea since I can only use this on my first property.

We are based on Maui and are looking for SF homes and condos to FF and possibly hold for LTR/MTR.

It's an asset based loan so most all the requirements will be dependent on the rent covering the debt so if you have cash but no stream of income it'll be the way to go.

Make a decision based on the numbers.

Potentially more security deposit given the shorter-term nature of the stay.Most states, NC for sure, don't differentiate MTR from LTR.

My wife and I are in based in San Jose but we have lots of connections in Utah.

So, join some of those Indy based real estate groups on Facebook.  

While it is under 100K, and loans under 100K are often more expensive because they are harder to get and because it costs the same to underwrite a 100K loan as it does a 300K or a 1M loan.... and certain costs are fixed and not based on the loan size (think things like processing and document fees and underwriting costs...).