Most Tax Benefits? Renting Spare Room from a Primary Residence vs Investment Property

[Augustin Calderon]

If you're weighing between purchasing a primary residence and renting spare bedrooms versus buying the entire property, which is more tax write off advantageous.  In either case, the idea is to do the short term rental. Such short term rental  will follow these criteria(see numbered list below), in order to take advantage of (1) qualifying to fill out schedule E, thus avoiding the Self-Employment tax should there be any profits. and (2) being able to offset your W2 income should there be a paper loss. 

Criteria for short-term rental:
1. rent 2/3 bedrooms in short term rentals
2. Do not provide substantial services 
3. average stays of 7 days or less
4. materially participate
 

Primary Residence route:
I presume that doing this route will:
1) portray yourself less risky from a lender's perspective
2) Less downpayment requirements. Allowed to put less than 20%
3) lower mortgage interest rate
4) proportionally straight line depreciate your property. 
Question: Is it worth it to perform a cost segregation when you rent out spare bedrooms ? Or is this an overkill ? Or would it suffice to simply do do the straight line depreciation. 


Investment Property:
1. Deprecate entire house. Cost segregate the entire house. Truly maximize the cost segregation benefits.  
2. Simplify tax filings as there is no need to do all the proportional calculations. 
The only con is the higher interest rate. 

Question: Do all the presumed benefits above outweigh the higher investment property mortgage rates? 

I may be be biased, but it seems so much cleaner to handle in all aspects.  Being able to enter all expenses, mortgage, mortgage interest, sewage, water, security , gas/electricity , cost segregation study to depreciate it  over 5,7,15 years as opposed to the 27.5 years. 

Additional Question:
Is it possible a lender give you a close to a primary residence interest rate for your investment property ? Considering you currently have 0% household expenses, I believe this should actually be less risky if you currently live for free.