I’m not sure i see the benefit to the second option as then i have to pay taxes on this rental income and then i believe it does not look like my primary residence anymore.

@Jenny Stallings Check out these informative links:https://rehabfinancial.com/blog/why-you-shouldnt-u...https://www.biggerpockets.com/forums/67/topics/81818-benefit-of-using-own-title-company-vs-sellers-title-company-fannie-mae-hud-etc  

I won’t count me out just yet as I will adjust accordingly.

If you don’t claim depreciation expense, the IRS will deem that it was claimed and adjust the basis of your property when you sell.

I'm aware of freedom to contract and just because we use a standard form as a basis doesn't mean that we can't adjust or modify any of the standard clauses right (by means of strikethrough, deletion or addition of language)?  

There are a number of legal ways to deal with this situation and they all have the potential to benefit you.  

@Dustin, if you are looking for passive investments but want to benefit from scale, you may also want to look into DSTs and the new " Opportunity Zone Funds ". 

Both of them have 10 year loans that are fixed for first five years and adjustable rate for the last 5 years. 

Chase Commercial just gave me 4.5% on a 30 year amort, 5 year adjust, call in 10 ...AND I’m taking cash out! 

On the other hand, these tenants have been fantastic (my best so far) and renovating with them present would help generate more goodwill and perhaps lead to extended tenancy and other network benefits (They are both nurses and may have co-workers who are looking for apartments).