The source said it "definitely" was not at the house when police went to execute their search warrant last week.
The tank had neighbours shaking their heads in disbelief yesterday. One could not believe it was a fake.
"It looks pretty real," she said, before adding: "Too much money."
The inflatable is positioned near several giraffe sculptures on the mansion's immaculately manicured lawns.
There is also a rhino sculpture at the property.
The source said the "massive" tank was "typical" of Dotcom's flamboyant sense of humour.
Inflatable military "decoy" vehicles can cost about $3800 each, and have real-war uses such as fooling enemies into overestimating army strength.
The dummy resembles a T72, a Soviet-designed main battle tank first produced in 1970. A real T72 can weigh more than 42 tonnes, is built to cross rivers up to a depth of 5m and has a maximum firing range of 9100m.