Walk me through income & tax implications

[Andrew Taylor]

My wife and I are closing in on our first multifamily property, and I'm really enjoying daydreaming about all the positive cash flow and how I'm going to enjoy it. (Don't anybody burst my bubble.)

I'm curious about a couple of things, though. I understand rental income is considered passive income, versus ordinary income from my employer. Say our property nets $24k/year in cash flow. That's $2k/month after all expenses, debt service, etc.

Income question: How do I make use of the $2k/month? Just spend away? Anything special I need to do (or not do) since that's the "passive income" from the rental?

Tax question, related to income question: How is the $24k/year "segregated" (for lack of a better word) from my ordinary income? I don't want to end up paying ordinary income tax rates on the $24k because I did (or didn't do) something with it during the year.

Random other question: Does the fact that the property is commercial (48 units) have any effect on income and/or taxes?

I'm planning on having a CPA handle this stuff for me when the time comes, but I'm trying to understand it now so I can make their job easier later.