Like I said, looking over the materials it sounds too good to be true . . . and that's often a red flag.

If the tenant wants the home and if I find them suitable (no red flags in the showing) then I ask for the application fee. 4.

so red flags.1. money up front usually 500 to 800 to suck you in.2. rate to good to be true IE 4 to 5%3. reason we can do this is you buy this NON exsistant insurance policy  ( Fraudulent from the get go)4. bad English or poor website 5. offer to show you their picture with their drivers license  ( I like that one LOL)I suspect your private lender has hit you with a few of these you already mentioned the insurance. 

If a neighbor doesn't maintain their property or has trash everywhere that's a red flag for me.You should look at the property as if you were the end buyer. 

One of the red flags that came out of that inspection was a note that we should have the brickwork inspected by a mason for tuck pointing.

If it looks like 2 separate families are living there, then they can flag us and take us to court if we don't correct the situation. 

I am also not a CPA but I might be concerned about the tax implication from going full bore STR (cost seg, renting etc) to personal use in 2 years.That could be a red flag and trigger an audit.

Hard to say whether they will be good or bad but in the private lending space (DSCR/Fix and Flip) - the loan products, programs and rates are all going to be very similar - so its usually best to go with the lenders with the best track record and reputation (reviews) rather than roll the dice unless you are getting a really really good rate or loan (although that is also a potential red flag with a newer co).

For real estate you have expenses and you have depreciationYou absolutely should always include your expenses and if the property is not profitable it should be setting off red flags as to why.

Big red flag.