You're correct.

The main factor for me, if I try to correct the tax records, it might end up getting into higher tax bracket  and it may not be attractive investment anymore, but the big question I have is, will the city/county put it into higher tax bracket if we increase number of rooms and dont have to increase sq ft size at the tax records?

(Make sure you turn on the Class Feature in the Preference Section of QuickBooks).When you set up your properties as a class, and you invoice your Guests for the rental term, you will choose that vacation rental from the class feature of the Invoice.If you have repairs or expenses for each vacation rental, you will write a check and choose the correct vacation rental from the class column on the check. 

Sounds like you might need to find a more economical person to maintain your fence!

The correction is coming at some point.

I want to make sure everything is done correctly, especially the tax end of it.

I tried editing it a few times and I typed it correctly but this site, for some reason, jumbled what I typed so I apologize for that!

Anthony, You didn't say if the property is under an llc, if so then @Simon W. is correct about the accounts. if the property is under your name and you are just forming the management llc, then you will need a checking account for that company an account for the security deposits. i recommend separate accounts from your personal account for the business, it helps for many reasons. that said, why do you want to start an llc for the management co ?

Obviously it is preferred to have it in a LLC but a typical residential conventional loan will not allow an LLC to be on loan documents and sign at closing, correct? 

Unless you have software that will teach a renter how to put a screen back into a window or get them to properly maintain a yard for once...