This is one of the time when your have to follow the song and become "as cold as ice" Your response should be: Thank you for letting us know about your current situation, we will definitely make sure to notate your rental account.

They can choose to exercise the option or they can choose to walk away.

I thought the title to this thread was a new hit Country song :D

By choosing to not use debt, your choice of using cash should be strategic enough to allow you to achieve returns you could not achieve using debt.

Ask him about different parts of the biz...wholesaling, flipping, brrr/rentals, multifamily, lending, managing rehabs, etc. why did he choose to focus on wholesaling. 

The truth is the process of determining that, and then choosing (as a regulator) to do something about it has as many layers as an onion.

If you choose not to rent to convicted felons that is your business.

You can choose to keep it below the line as long as you remember that day will inevitably come and you will have to pay for these things. 

., if I can rent this old unit in a quad for $550, but right down the street there is a brand new apartment complex with all the amenities for $625, then why would I choose the older one?

If it is 2-4 I would pursue a traditional mortgage in order to get the terms you are looking for.  5+ units you may have to pick and choose what terms are most important to you.