I don't know of a city that regulates against MTRs.

Hi Ankur, I'd monitor the progress of SB-280 which should override local regulations with a state-wide airbnb registration system.

Probably less or no regulation in a place like that, but always good to check with the city and also good search for the city to see if there are any proposed regulations or dissention in the city. 

What are the best practices in this situation, especially considering any local laws and regulations that might apply?

The location of the lender doesn't necessarily impact your chances of getting a mortgage or the efficiency of the process however, local lenders have a better understanding of the local real estate market and regulations as they are more familiar with appraisers and other closing professionals in the area which can expedite the process and you will get a more personal touch and easier communication.

Based on my experience even with hiring contractors you may also need to do some minor project management to keep the project on track.I definitely see what youre saying about the General Contractor saving me money in the long run due to him knowing local regulations better and getting better price on materials!

With a substantial portion of this debt held by banks and regulators pushing for decreased exposure to CRE, liquidity becomes a pressing issue.

The removal of the owner occupancy for AFUs is a fairly recent regulation.  

Bottom line all private and HML ers are free to change the terms at anytime .. they are not regulated federally like conventional lenders.

@Erica Schubach I would say if you have a HOA, it all depends on their regulations, but from what i have seen most HOA in Kansas City area or the cities that are better areas like Lee's sunmit, overland park, they prohibit short term rentals, plus the rules of condo are much more complicated and more strict than single families or townhouses.