Ned Carey,You are correct.Essentially interest is a way to siphon off income or equity from an entity or lower a taxable income in one place.One even better creation is the FLiP.

So my understanding is that when you do a 1031 you have to roll all the proceeds from the sale into the new place or be subject to taxable "boot".

If you recently inherited the properties, you may not have any taxable gain to worry about.

In this case, you get to keep all the profit (which will be taxable) and simply make back the payments back to your 401(k).

Second, if the previous owner had been in the home for a long time there's also the possibility that the taxes shown on the MLS are based on a capped, lower Taxable Value.

The key is to reduce your taxable income by paying "business expenses" i.e. your expenses.

Total expenses including staging, real estate commissions, concessions is $78,500, for a taxable profit of $19.500!

The tax planning strategy that some of the posts have eluded to used to involve getting the renters out of the property, moving into the property and converting it to your primary residence, and then selling it after a two (2) year period in which you have held the property and lived in the property as your primary residence so that you can exclude up to $250,000 in capital gains if you are single or $500,000 in capital gains if you are married (depreciation recapture would be taxable under this strategy).

Now if he passes and you inherit the home at $90k and sell it there is no taxable gain.As for the managing and signing leases.

For rental properties, taxable income and cash flow are two wildly different things.