Your primary lender will require your secondary lender to sign a document saying they get paid first in case of default. 

Whatever they think you have done would have to be worth the legal costs to try to recover.

There are several legal concerns with your proposed business model which should be reviewed by a local attorney before you begin leasing.

Account ClosedNice to see you participating in the forums ... and the small step forward of dropping one of your frequent {stuffed} keywords from your post.The handling of a squatter vs a tenant will undoubtedly differ with jurisdictions, so the ultimate advice is to consult your legal counsel on the matter.The crucial distinction - at least here - that that a squatter had no legal right to be at the premises and is essentially in trespass / illegal possession of the property.  

it's not the zoning you're changing but the legal usage btw.

Under Alabama law, Tina now has all the legal responsibilities a landlord has, including the responsibility to make repairs, etc.I strongly discourage people from entering into subtenancy relationships. 

As long as you have a process, it goes pretty quick.I go through a house and do a quick visual inspection to identify specific issues I want to document.

(A basement apartment or carriage house is actually the only way you can do short-term rentals full-time legally here in Denver.)

Fiction: I like legal thrillers, stuff like John Grisham. 

Now if you never met your tenant and had a outside property management company and never personally inspected the property you would likely have a perfect defense to that claim but even then they could sue you and you would have legal fees etc to defend it.