Primary Financing for Short Term Rental???

[Patrick McCandless]

Hi all. I can't be the first to have this idea, but I can't honestly say I've heard anyone else doing something similar. I have what might be a great opportunity to purchase a home off market to make it a short term rental. The home is in the town where I own my current primary residence (which I am keeping, not selling). I am looking at my best financing options and the most obvious best option is purchasing as my new primary. 5% down conventional, great rate. The next best would be purchasing as my second home. 10% down, almost just as good of a rate. If I'm able to save the $27,000-ish by going with the 5% down that would be preferred so I have the funds to complete the cosmetic rehab needed as well as furnish the place and still have reserves. It will still cash flow great with 5% down so that's not a worry.

My question is what would be required of me for it to be legally considered my "primary residence" if I go that financing route? Just have all our mail sent there and say we reside there more often than our current primary residence (which would then be considered our second home, I guess)? And what kind of tax implications would that have if we are short term renting our "primary residence" versus short term renting a "second home". I obviously don't want to do anything that could raise a red flag with the lender or IRS or anything like that. I know if I get financing for a primary residence I'm technically saying that I will live in it for at least a year, but this gets a little grey when talking about making it a short term rental where it will likely be occupied 40-50% of the time and I can still have my mail sent there and technically reside in it the other 50-60% of the time.

Any help is appreciated!