What documentation will I need to provide to the IRS in the event there are any audits? 

Typically what @Samuel Diouf suggested will not work, unless you also include a significant and successful value add, for a few reasons 1) debt to income requirements likely will provide a means to get a loan on a 2nd property.   2) saving 5% for OO down in Orange County on MF likely means at least $50k with closing costs.   3) the home if purchased rent ready off mls will still be cash flow negative after a year (and 2 years, 3 years, … at some point it will have positive cash flow but I would not expect it in less than 3 years on rent ready property.  

Reason I do not want to do a cash out refi on my primary is because my rate is locked at 2.7%.

i'm skeptical that it will 'cash flow' $400-500 a month if you're using a HELOC for the down payment. 

Purchase price: $100,200 Cash invested: $32,000 Sale price: $212,000 Contributors: Peter Vekselman Partner Driven, in partnership with Ron Rowan, purchased a home on Dearborn St, Hobart, IN, for $100,200 on 2/21/2024.

The moment my partner and I feel the cash flow from short-term rentals (STRs) isn't worth the effort, we'll pivot. 

There are ways to use loopholes but it has to be done correctly to avoid issues.If you can rent your current home and it cash flows simply do a cash out refinance pull out some cash and use it for a down payment.

On the resort site when you go to the link provided in the email it takes you to Edge where it asks for a group name and then your email address (which is different than the instructions in the email). 

I am planning to live in the main house with my grandma so I can save up some cash.

This also makes it easier to either gain a larger profit if flipping or room to do a cash out refi if holding.