This allows you to access funds while keeping your existing mortgages intact.Second Mortgage: Explore lenders who offer second-position loans on investment properties, though rates will be higher.Cash-Out HELOC : While traditional banks often restrict HELOCs on non-owner-occupied properties, some portfolio or private lenders may offer HELOCs for investors.With $15-20K in liquid funds, look for deals where you can negotiate terms:Seller Financing: Negotiate lower down payments or interest-only periods.Subject-To Financing: Assume the seller’s existing mortgage while covering the down payment.Lease-to-Own: Lock in the purchase price while using rental income to build equity.

The condo will limit the rental options to age restrictions. 

This is something their screening probably would have caught, or their system would have a legal procedure to deal with it.

I have heard there are FHA construction loans but that they are pretty restrictive and do not allow for multi unit construction.

Is there any legal action one can take or is it just a lost cause?

Sad that NY isn't taking advantage of expensive hotels to get most of the US traffick to stay on US side and just do a day visit to Canada side and come back.I don't know why small towns change their STR rules and make restrictions.

Just to add to what has been said here - if the seller described this as a triplex on the sale documents, they might have a legal liability.  

.: Is it legal, per the IRS, to rent my primary home back to myself? 

In the program, it appears that you offer a Pre-Loan Application-- perhaps this is how the program is legal? 

Hi @Heather Bailey something to consider with this is legal mother/daughter may not mean legal duplex.