This is the kind of thing agents lose their license over.

Wrong might not mean that I lose money but that I don't make much and tie up funds.  

It seems she has more to lose than you if she is putting her money into it for the rehab.

Never lend to owner occupied-  Had a friend lose $20k because the borrower hired an attorney and the judge said since the loan was on an owner occ, the lender by default fell under strict SEC lending guidlines.  4. 

He makes money and the bank loses money - this is the first time i've experienced it and figured I'd pass the story along.

Also, my fear is that prices will come down a lot quicker than they went up and I'll lose this opprtunity.

They are losing the house.  

Since 2/3 of my tenants are students, I was concerned that month to month leases would leave me with vacancies in the summer, that students and their parents would be concerned about them losing their homes halfway through the year and that I would forever be renting to those that weren't planning ahead.  

As long as I prevail, the cost would be burdened by the losing side. 

There is an old saying in the used car business: the guy that gives the first price loses!