That sounds like a more elaborate version of what's happening in Nashville, namely, condos that are appropriately zoned and STR-permit eligible, with HOAs that explicitly allow STRs.  

In either of these scenarios, is the cost of the mortgage principal payments deductible?

You should have enough reserves to cover at least one month of vacancyThe first one is easy, the third one is accumulated over many years, and the second one is learned by watching your expenses over a few years.For books:- on property management, get Managing Rental Properties and Landlording on AutoPilot- for taxes, Nolo's Every-Landlords-Tax-Deduction-Guide (get the latest edition every year) (and any other book for landlords from Nolo collection, they are all good).- for risk management,  Every-Landlords-Property-Protection-GuidePM me if you have questions or need more assistance.

We would like to conserve the lines for future rental purchases but do not wish to pay PMI if possible-also heard that the interest on the line on our house would no longer be tax deductible where the interest on the refinanced rental equity would?

-MikeHey MikeJust refinance it to restore your VA eligibility. 

I have not received a certified letter or any notice of deductions or issues other than one text a day after I moved out about a couple of minor things which I was ok with actually but still I haven't heard anything since then.

Then unless you're leaving out some piece of critical information you are eligible for the section 121 exclusion.

And landlords cannot deduct the value of their own labor, where a pro painter's cost will be.

I've received conflicting info from a few different CPAs, I'm curious if anyone knows what is actually deductible on the rehab side of a brrr?

Without the sacrifices you all make, we wouldn't be able to do what we do.If I had VA eligibility in my pocket, I would hold it for a truly great property.