Then on year 3 of not living in it you could sell tax free before the 2/5 yr rule expires.

Unfortunately, I do have a property in an HOA, which often comes with their own set of rules that you'd have to follow of course. 

In my experience, finding cash-flowing deals on-market can be challenging here (1% rule can be hard to find) but not impossible.

Just how important is this “rule”.  

The City I invest in has a somewhat outdated rule that states an emergency contact must reside within 60 miles of the residence. 

Not exactly sure what Safeguard does but if they are originating notes for owner occupied properties then they need to follow the Dodd Frank rules and anyone buying such notes should make sure they did.  

There's no point in having a rule if you don't know how to enforce it.Example:Requirement to Maintain Renters Insurance:The Tenant acknowledges that the Landlord’s insurance does not cover the Tenant’s personal belongings, injuries, or other losses.

For me once I've identified the target market/ideal guest, my rule of thumb is if enhances their stay/they'd pay extra for it splurge.

If she lives rent-free, you retain control of the property but lose the ability to claim rental-related deductions.For long-term planning, consult a CPA and attorney to ensure compliance with tax rules and align ownership structure with your goals, including potential conversion to a rental or estate planning considerations.

If not, consider establishing one for 2025, after learning the rules.