It is not clear what type of property he has nor is it clear what type of financing will suit your needs so further detail is tough.  

Very tough to get A or B class rents with the 2% rule down here in South Florida..

Gets me out of the middle and I don't have to be available to meet the repair person.Late Fees: $80.Breaking a lease: This is a tough one because technically they are on the hook for the entire term of the lease but that's barely enforceable.

I was thinking the same thing, it should not be tough to connect anything along the same wall as the kitchen and I am not really clear on how the existing laundry area and the bathrooms are set up but maybe move the laundry to the "strange" room and then make an additional bathroom where the old one was.

If you plan on living there for several years you will PROBABLY see both rent and property appreciation so the numbers will likely look better before you turn it into a straight rental.Going back to your condo, that is a tough analysis too.  25% vacancy sounds high but smoothed over an entire year I guess might be accurate.  

This is really a tough position.

The important point is that you must be able to prove that you had the intent to hold for rental or investment purposes should you get audited.

Unless you can prove you have some substantial capital and will use it to protect the seller, (again when your end buyer goes TU which happens very often in this scenario)

I know how tough it can be when everyone is piling on. 

(this is how you will prove that you actually make money from the properties)4.