Mortgages have both state and federal compliance requirements.  

Federal law allows him to break the lease if you or him wants to.  

It is certainly not federal law.

@Michael C Gregory  that is not a lender that is a theif... pure and simple.one thing I think folks really need to understand.. there is 1 point and 5 % money  but this is ONLY going to happen with a federally or state chartered bank that gets to borrow their money from their depositers or govmit.. so their cost of funds is 2 to 3% its how banks make money loaning money. there is no fantasy land of lenders out there that are going to give investor loans at those rates..

Currently a Federal Law Enforcement Officer and looking to invest in Real Estate in New Jersey. 

@Bryan Sowieja You're argument fails for any number of reasons:1) Legal: what you have overlooked is that while weight may not be a federally protected class, you've forgotten about other jurisdictions. 

Originating loan on SFR requires both Federal and state licensing.  

As others have stated above, there is no difference for federal income tax purposes.That being said, your business structure should not be influenced solely by tax implications.  

I’m in the 28% tax bracket for fed and 6.7% for California (my actual California tax rate is 9.3% but the 6.7% is net of federal tax benefit for state taxes paid), leaving me with a total tax savings of 34.7% x $10,000 = $3,470 (and this number is low because the $10,000 of tax deductions in excess of rental income is a low number).(3) Combine these $3,470 tax savings with the $7,500 increased equity and you got $10,970 in annual economic increase by house hacking vs. renting for $600/month.(4) There’s appreciation potential over the next 30 years that I hold the property, especially where we live in California.For the reasons above, if you’re currently renting, this is a no-brainer.

When I was trying to finance a multi-unit recently, I found that each lending institution has a unique set of internal rules in addition to the federal regulations.