Based on the rents, I would guess the $1350 house is in a C+ or maybe B- area, and the $950 is in a C- area.What neighborhoods or zip codes are these in?

Borrowed money from friends and family to pay cash for the property as the bank would not finance it until it had been remodeled, made livable, and brought up to code.

From tax stand point I would think you can separate from primary and be okay with IRS being that IRS will not be local code enforcement.  

Partner with a Real Estate Tax SpecialistThe tax code is complex, and mistakes can be costly.

We don’t sell property, but I can recommend the two gentlemen who replied to your post, as they know the STR 34747 zip code well. 

These are professionals with additional training and a stricter code of ethics.

Here is a recommendation I have for you as you begin to figure out what area you want to invest in.This website is a great reference point for figuring out what each area is like. https://www.areavibes.com/It gives you a total LIVABILITY score for each street and zip code & discusses crime rate, schoolsUse this rating and classification system I have created over time to get an idea of the "Class" for the area - A class B class & so onHere is my rating & classification for each livability score.80 and above A+78/79 A76/77 A-74/75 B+72/73 B70/71 B-68/69 C+66/67 C64/65 C-60/63 D59 and below FBest of luck and let me know if I can help answer any questions! 

And another part of the town considers it to be residential, so it's exempt from most building codes and inspections that would normally apply to hotels. 

Avoid any self-help eviction tactics like changing locks.Maintenance: As a landlord, you’re responsible for ensuring the property meets basic health and safety standards, including working plumbing, heating, and electrical systems.Inspections: While there are no mandatory inspections required before renting, your property should comply with building codes.

We had to bring the 1925 house to 2023 code which involved un-installing 26 windows that were already nicely installed (in appearance) in the house, reframing them to 2023 standards (at the time) which also involved strapping the bottom of the wood framing with metal straps (mind you this all after we had already completed the inside renovation).