So even though you're starting with the shell of a storage shed, you'll likely need to pull a permit to hook it up to electrical, sewer, and water, at which point the City will probably call BS on the "shed" classification and make you permit it as an ADU, and at that point your prefab shed may not meet IRC standards so you're back to square zero.Now, you may be asking "What happens if I just build it without a permit anyway?"

I'll spare you all the details, but I just need to know what other investors, appraisers, realtors, insurance agents, etc. think of this classification.

There are multiple local jurisdictions along the beach, and each have their own zoning regulations based on the zoning classification.

It took us a couple of months getting it prepared for STR which went live 11/1.The STR was rented for a total of 21 nights in Nov & Dec.That is a total of 141 nights rented in 2022.That would equate to an avg stay of less than 3 days a week.That should allow the STR classification in 2022 correct?

You do not need a SSN to take the class if I recall correctly.

The area is probably c plus class, if I had to rate it.  

Does anyone know if your home's tax classification would change or if any of the tax benefits that STR's receive would be diminished or negated if the home did earn another type of rental income throughout the year in addition to income as a STR? 

Quote from @Erika Albert: I specialize in helping investors purchase STR properties, I've compiled many of the rules and regulations throughout central texas below:Austin: the City of Austin breaks down short term rentals into three types, to learn all about these classifications, check out this previous postno permits are being issued for STRs for single family, investor-owned homes EXCEPT in the following zoning districts: Central Business District (CBD), Downtown Mixed Use (DMU), Planned Unit Development (PUD), General-Retail - Mixed Use (GR-MU), Commercial Services - Mixed Use (CS-MU), Commercial Services - Vertical Mixed Use (CS-V), General Retail - Vertical Mixed Use (GR-V)STR permits are being issued for Type 3, multifamily properties i.e. condos.

As you are the tenant it's doubtful that the onus and risk of this issue is on you.Legal and illegal in this context aren't referring a criminal classification, but rather whether or not the structure followed the property process. 

How do you understand a neighborhood's classification?