If it is a short sale the transaction would need to be arms length.

I'm looking to purchase a small apt with hard money and I'm thinking of how to refinance the loan through conventional banks for a lower rate with little income on tax forms.  

Julie I get it I have owned 3 sizeable HML companies in my day.. and done well over 2,500 transaction as the owner principal of the company.. and I have done them every which way.from no money.. to needing money.. to equity share etc etc.. end of the day its the character and capacity of the flipper that is paramount.tough thing right now for most is finding deals that meet the LTC ratios that make 100% funding even remotely safe. however you are new to BP I see and generally speaking this is a beginners site..

An I believe your lender is referring to the fact that owner-occupied properties are viewed as lower risk for Banks' Underwriters thus the terms are more favorable.

You show the property's value through a variety of methods but two of the most common and successful approaches are 1) testimony from a licensed appraiser, or 2) showing that you purchased the property recently in an arms length transaction.

It can be harder to manage over an hour and a half away and even with the lower rents it takes a while to find good tenants because people there just don't make as much--and we don't allow dogs, which many people in the country have. 

Remember prices tend to be lower in the winter so start looking around October or so.

So even though they felt it was a risky transaction from their point of view, since it was all done in-house, they were willing to finance 100% of the deal. 

Your basis will be what you paid for it plus any improvements or the fair market value, whichever is lower at the time it was placed in service as a rental.

I'd also look back to the purchase contract that was used in the transaction.