If I leave this amount in Sch-E, I get taxed at ordinary income tax rate at Federal and State level, which along with my regular W2 income can be substantial.

If you own this as a rental then there is not homestead exemption and you'll pay much higher tax rate than a resident/owner occupant in SC. 

We like self-storage because even if there is a recession, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions.

If they have a good interest rate it might be worth looking to see if you could assume their loan to take advantage of the lower rate.  

Private Money or Hard Money LoanHow it works: Short-term loans from private or hard money lenders to purchase the lot and finance the construction.Benefits: Easier approval and faster processing, focusing on the property value rather than your income.Downside: Higher interest rates and shorter loan terms (typically 6-18 months).

You have to put more money down and pay a higher interest rate and is limited to only 2% IPC.

Finding deals at good discounts is often easy. 

Hence the lot on which the house resided was taxed at a 45% discount based on actual value, while the tennis lot was taxed at about 4 times what it should have been by value. 

Our area has a good selection of hard money lenders, and every now and then, you might find an owner willing to carry the loan, often at attractive rates.

Something many new investors don't think about is that property managers usually negotiate volume discounts for some of this stuff.