starting a business / investment property taxes

[Justin Littke]

Hello, I am 25 and just moved to VA Beach and started in REI. I just purchased my first primary home, single family, as a short sale, for 130k that is certainly worth 160k or more (170k or more after I do some simple labor and landscaping; if i invest 20k in additions can sell for possibly 220k however I dont see myself going this route as ill need the capital). 15 yr 3% interest mortgage. Nothing was wrong with the property; so I think i did very well on that buy. I only have 20k and will have only 20k in savings/capital after this as I have no extra $ each month after bills. My plan is in 2 years to buy another SFH as an investment property under a Sole-proprietorship business I'd form. This way I could set up a home office in my primary and deduct business expenses like home office and utilities involved in running it and travel expenses to and from investment property etc. and I assume after depreciation and other expense deductions I would show a loss on paper for the investment property and not pay tax on my rental income.

My goal is very modest, in 15 years to have 20k/year in cashflow coming in and a million dollars networth. This will enable me financial freedom.

My questions: How does this plan sound? Am I not accounting for anything (tax-wise on an investment prperty or business or otherwise?) Also, can I ultimately sell or gift properties to family member for less than the property is worth where they can then live in them for a year and turn arund and sell at profit to get around capital gains? Thanks! -Justin