The one big thing that you'll need to investigate is why they are not paying, if it is for a job loss/not paying due to the pandemic, then the restrictions for evictions are steep and you need to make sure there is a big spread for the cash for keys.

There’s also a lot of regulatory red tape, licensure and inspection mandates, and some weird lease restrictions. 

One reason is restrictions on sex offenders living near schools.

But, given that they are seeking to purchase, it seems like an interesting opportunity.I envision this transaction as a more restricted version of what they are doing in San Francisco: https://www.verbhouse.com/.

@Holly Barrett you should NEVER work with a lender that has any such restriction.  

Local to me in this instance is not restricted only to Pasadena and can include the Houston area. 

Getting a variety of restrictions from 3-months of payments shown, 12-months of payments, full repayment of any missed payments. 

Children that are fostered or adopted are no different than birth children.You could restrict based on occupancy standards, but it doesn't sound like that applies.

They don't allow you to STR for 4 season due to septic tank restrictions?

I feel like Illinois is one of the most restrictive states with laws regarding utilizing that way of renting.