This avoids the employee classification for the hiring company or person and saves paying taxes and workers comp etc.

It is not a second home, it is too close to qualify for that classification and you currently live in your primary residence.

A 5-unit property would fall into the commercial property classification, but since the loan amounts are normally pretty small on these they are often small balance commercial deals.

Buying a note at the table, after closing or within a short period is considered "table funding" a wholesale mortgage function requiring a license as a lender in some classifications and states. 

I look for (crime is everywhere but I try to look for where it's less on the grid) areas that are classified as A (pristine properties, perhaps gated community) or B (business professionals and families looking for top rated schools, perhaps safer to walk at night, and that is all relative but still....) perhaps C (student areas) and I know these classifications are defined differently by everyone.

Sounds like you will have at a minimum a zoning issue (rezoning) or depending on the age, will need a waiver for (special) variance for your re-classification and property card change.

If I'm renting it out 8 months of the year, and living in it 4 months, does that put it in a different classification?

Watch your asset and neighborhood class if buying houses for cf. 

This is the fundamental problem I have with Wall Street who takes too much fees off the hard-working efforts of the middle class. If

They are a classification that online sites like foreclosure.com and Zillow use to entice buyers into contacting someone to make a deal.