The laws apply to owner occupant but puts fear of regulation into any lender. 

Seattle has become more lenient on ADU regulations because of the housing shortage. 

note some localized regulations require creativity to envision

Do you know if the city has any STR regulations? 

I've operated MTRs in several markets and have seen 75-80% occupancy on MTRs that can't be rented as STRs due to regulations (ie we don't rent them as a hybrid MTR / STR strategy).

Remember, before investing in a property, it is important to research local regulations and conduct thorough market analysis.

Therefore the federal government can regulate the transaction.

Whoever creates and sponsors the syndicate needs to comply with the SEC regulations for securities offerings UNLESS the offering qualifies for an EXEMPTION from registration.  

It’s advisable to consult with a tax professional who has experience with real estate investments to ensure that this strategy aligns with IRS regulations and your financial goals.

Rental arbitrage may not be a bad idea for now in certain states but a lot of states are tightening their grips around Airbnb which can lead to laws and regulations changing overnight and you’d be left in a tight spot depending on the terms of the lease.