So, if you have an S-Corp and have a mortgage on your property and the rental has a loss (or you do a cost segregation), then you will not be able to deduct this loss once your capital basis is depleted. 

I was exploring San Antonio recently and trying to understand that market more as compared to Dallas Fort Worth where I see reduction in monthly cash flow and depleting overall returns as of now (tons of rental inventory there)

That depletes their savings. 

When these high-earners start depleting their savings, and more become unemployed it'll change things, but we have quite a bit of way to go there.Everyone's saying it's rosy but we start 2024 with cuts from the get.

Refinance the mortgage down to the 75% LTV which will save you 1% on the rate but deplete some of your cash, then use a HELOC to recoup the 5% + gain an additional 5% if you find a bank, (Bangor Savings) that is able to lend up to 85% LTV on primary residence HELOC's.

Regardless of whether the interest payments were capitalized or paid outside of the loan (as is the case in Preston's example) what happens if there were delays and the interest reserve was depleted before the project is completed?

FannieMae publishes their underwriting guide, Dec 2023 version:  https://singlefamily.fanniemae.com/media/37656/displayIf we scroll down to page 388, there is a section "B3-3.3-03, Income or Loss Reported on IRS Form 1040, Schedule C" that says:The following recurring items claimed by the borrower on Schedule C must be added back to the cash flow analysis: depreciation, depletion, business use of a home, amortization, and casualty losses.Now compare the above to the list in this OP post.

Therefore, for taxable years beginning after December 31, 2021, and before January 1, 2024, ATI is computed with regard to deductions allowable for depreciation, amortization, or depletion (i.e., earnings before interest and taxes (EBIT)).

Here is a part of the letter, I sent to the seller:The home inspection was completed on September 29th (please see attached) and the following issues were pointed out: 1.The wooden floor frame in the middle unit is deteriorating due to either prior water leak in the bathroom or due to moisture infiltration through the walls and foundation.2.There is evidence of significant settlement under the middle unit bathroom and north closet.3.The settlement of the floor and walls has also resulted in settlement of the roof frame above this area, ceiling shows cracks.4.There is an obvious depression on the roof – water is ponding on the roof above the middle unit, which adds excessive weight on the roof and potential for leaks.5.Asbestos containing material has been found.6.The current bedroom heat installations in the north and south units pose a safety hazard from carbon monoxide, fire and oxygen depletion.7.An electrician performing upgrades did not use ‘arc fault breakers’ in the north and south unit breaker panels, which is required by the national electrical code.8.Upgrades to the electrical system, promised by a real estate agent, have not been completed yet.

@Wenhao Leu, I do plain 30 year fixed loans using combinations of subject property rental income, asset-depletion-as-income, and helping folks like you get honest with the IRS for a year, on a fairly regular basis.