Where Does the Income Come From?

[Gordon Olson]

I am new to REI and here's my situation:
I'm a little confused as to how the actual income is made from REI. When house hacking does one just keep for themselves whatever income is not used to pay mortgage payments and make wealth from passive income? Or when you sell a property do you just keep some of the sale for yourself?

And how is it taxed? Being in business for myself I assume I just have to keep track of how much income I make. But if in the case of doing a 301c where would I make any income off of that as long as I defer it and never see it? 

Thanks for the clarification.

Gordon Olson