Short Term Rental Financing Advice

[Jesse S Kogelman]

Hello,

I am seeking advice regarding short-term rental financing. I am in the process of purchasing a condo and using it as a short-term rental in Traverse City, MI. I was given a few options for financing by different banks:

1. Investment loan: 5 year ARM at 5.0% amortized over 20 years (20% down)

2. Conventional residential loan: 30 year fixed for 4.0% (20% down). This would be possible if I live in the condo for 2 weeks of the year per the mortgage lender.

I would prefer the conventional loan obviously, but I would not be able to transfer it to an LLC. I am less concerned about liability but more concerned about any potential tax implications if I chose the residential loan. This would be my first investment property and I plan to purchase more in the next few years.

What are the pros and cons of each loan? I would appreciate any advice or thoughts. 

Thanks!

Jesse