The intent it to completely rebuild these units (200+ people living in these townhomes). 

How do you know if you'll be legally allowed to convert a detached garage into living space or create any other type of square footage increase: attached garage conversion, basement or attic conversion, ADU, etc.

Can only suggest you do NOT over look living with a tool, dating, before you decide to get married to it by moving a bunch of tenants over.   

Now, as the tides of life bring me closer to the serene shores of Navarre Beach, where my children have woven their lives into the local tapestry, I find myself drawn back to the world of STRs with a heart full of curiosity and a mind eager to refresh & learn.Looking forward to learning and growing with you all,

How many people will be living in the unit?...

I would have a lively discussion with the syndicator's CPA.  

I have a friend who lives in California but is licensed in many states including Puerto Rico to do mortgages with Sunwest. 

We understand there is a limitation on how long you are required to live in the property to keep your homestead exemption.

You want to work with a professional who will understand whether the rehab that you do would be required to be capitalized and depreciated over years or eligible to be expensed in the current year.Furthermore, you live in New Jersey which has one of the more complex tax laws in the country.

The downside is that I give up the freedom to live in whatever neighborhood I want to - I could only afford a handful of neighborhoods further out in the boroughs.