Portfolio income, such as interest does not have any preferential tax rates so it is taxed at your ordinary tax rates.For the average taxpayer, interest income will not be considered active or passive which the original poster is trying to claim(as passive income).You, from my understanding, are in the business of originating and buying notes.

The key factor is ensuring the property qualifies for favorable tax treatment by adhering to IRS rules regarding short-term rentals and material participation.For the 7-day rule, the IRS requires that:The average guest stay must be seven days or less for the property to qualify as a short-term rental.If the average stay is 30 days or less, you must provide substantial services similar to what hotels offer, such as daily cleaning or concierge services.Regarding material participation, to further classify the income as non-passive, you must meet one of the following criteria:You spend more than 500 hours actively managing the rental in a year.You manage the business yourself and spend at least 100 hours, with your involvement exceeding that of any other person involved in the rental.Please note there are actually 7 ways to qualify, the above two are the most common.

I also found out that there is no tax break at all.

At least that's my opinion & others may disagree. 

You will never see 2.1% again in your life so before you move you should do all of the renovations with the equity so it's fully updated when you decide to leave so it actually becomes a strong cash flow property and not one you leave with stuff to do and it all comes up at once.

Looking at Visio lending at an option as well.Visio seems more established and longer time in business.

Or, at a minimum, the DSCR is ready to go pending a signed lease agreement.

I work at BiggerPockets now so feel free to shoot me a direct message on here! 

Purchase price: $250,000 Cash invested: $62,500 Brand new build: Appraised at $310,000. at closing the builder financing and buy down of 1% put the 30 year fixed financing at 5.75% investor financing with 20% down.

My initial thought was looking into the best approach (if any) with this lender to get one of these two specs at a discount which would get one of them off their books.