They know the system, file everything correctly and on time.

The $700 may not be correct yet the $19k plus is.

You are better off making a small investment on your own, maybe a two-family, and use it as a proof of concept.If you don't know anything, trying to source deals off-market will just be taking money and burning it on postcards without the correct systems behind and the incentive for people to call.

@Ted Barrettyour analysis is roughly correct. 

Correcting this should adjust the profit at sale.Additionally, your property taxes seem quite low.

Last question, you are hiring an architect and submitting plans to the city in a renovation like this correct?

Quote from @Felicia West: Thank you, Zachary for your very thorough explanation.Quote from @Zachary Jensen: Hey Felicia, At a high level you’re correct that when you and your husband’s income exceeds certain thresholds (over $150,000), passive losses from rental properties, including depreciation, can’t offset your W-2 income unless you or your spouse qualify as a Real Estate Professional (REPS).

It shouldn't be a recurring scenario (or it looks a little less "accidental") but in cases like this, your job is to simply have the correct intent, see what you have done to demonstrate that and build your case.

However, the worst decision in real estate investing are made because of emotional attachment to property and both of these have that potential (although they also have high value if done correctly).

Were all of the renovations you did in the past permitted correctly or DIY?