If the wholesaler makes someone believe they own the property or markets the property (as compared to marketing the contract) the wholesaler could in fact be in "agency" and violate numerous laws.

How should I set up my business structure so that income from my rentals doesn’t increase my personal income reported to the IRS?

The strategy we will use is buy and hold rental properties out of state.

You're not wrong but there's a consistency of look and this is a higher-end rental (although I'm mindful that everything has a range).

I'm not entirely sold on the idea of note investing over buying and holding rental properties. 

I do wonder if this could be accomplished with a 7 residential unit and using one unit as a short term rental though. 

There are various makes, select one that is overbuilt if you are putting it in a rental.

Both structures are treated as investment real estate and subject to the same issues as a sole ownership rental property. 

If they are not, then the Sheriff removes the individual from the property, gives you access, and then you can remove everything from the rental and place it on the curb.

For STR definitely connect with a local RE broker focused or experienced with vacation rental regulations.