While this does technically satisfy the requirements on paper, it would never hold up under audit and would be considered evasion/fraud WHEN discovered (not if).

For someone like yourself, you would likely have no problem meeting the requirements and likely exceed them with no stress of being audited. 

They will cost $100k to get going and having to have an audit done to comply with sec requirements let me tell you is a blast (insert sarcasm).

or only if an audit occurs?

It is convenient, but it's an IRS audit flag having a $0 income "property."

With that said, there is a de minimis election that allows you to expense any capital expenditures under $2,500 ($5,000 if your business has audited financials). 

If they don’t, it could raise a flag for an audit.  

It is required if the IRS audits you later on.

To minimize audit risk, it’s advisable to choose “Other interest” instead of “Mortgage interest” when reporting.Part 2: Forms 1099-INT from Investors to Private LendersForms 1099-INT Explained: Similar to the interest earned on savings accounts, Form 1099-INT outlines the interest that must be included in taxable income.

My thought is that if the IRS audits me, I'm perfectly capable of showing how "Joe Smith" paid my venmo $1K, I transferred it to my personal account, I also have a lease agreement identifying that $1K and Joe Smith's name.