Check with your municipality about how property taxes will change when you buy the place.

Readers should seek professional advice.

I pay $875 (including principal, interest, taxes, and insurance) and rent it out for $1,625.

What's even more frustrating than asking the IRS help desk, is asking a Turbo Tax "Tax Specialist".

Our reputation is too important and the professional offices certainly show that!

You might even want to setup a C-Corp (for tax and liability reasons as well) to manage the business with the guests and pay rent to your LLC. 

When you live in that duplex for 2 years and then sell you'll be able to take 50% of the profit tax free (the allocation for the side you lived in). 

Professional tenants can smell an opportunity from a new landlord from a mile a way. 

The property was rented and generated $160 cash flow after mortgage, taxes, insurance and property management fees were paid.

However, before you do so you should ensure that your revenue from rental income covers ALL your property expenses in the townhome, including mortgage, taxes, insurance, maintenance/repairs, vacancy, property management, etc...