Seems odd that two appraisals can come out $50K apart on a home under $200K.

OOS TK is my best bet.

This seems like an odd way to structure it.

After all, their best bet is to get it paid off in full, not going to auction or doing a short sale or something like that.I've also heard that the sellers sometimes think it's already too late to fix. 

Odds are good mortgage rates will drop a little more over the next week or two, or at least not move up during that time period.

If it is such a great deal, and owner financing is not an option, your best bet is to bring in an investor to cover the down payment and reserves.

Looks like there's some good possibility of a little above-average appreciation there like you said, but I probably wouldn't bet on that. 

Scottsdale and surrounding areas seem like my best bet but i'm uncertain about how strict those areas are on STRs.

Assuming they are still good tenants and want to stay, why not keep rent the same but ask for an 18 month lease, then in summer if I raise the rent and they move out, I have better odds of renting it quickly with less vacant time.

Anything else I am willing to bet someone that makes money from selling lists or providing DMM services is behind it all whispering in your ear that DMM is OK!