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

I"m also seeing people doing STRs to get the tax benefits besides the higher cash flow. 

For example, this investor that I met recently said not to buy properties at tax auction for 100+ different reasons.

You can probably beat $2000/year insurance, but the management fee should be 10%, you need to factor in turnover too and 5% is probably not enough for both maintenance and turnover and I assume you added it, but you didn't mention property taxes (which have been terrible in Jackson County lately since Frank White decided to jack them through the roof). 

I'm wondering if some one can help with an explanation about why a Hotel has many rooms with tax lien on auction? 

For tax purposes, rental income is generally recognized in the year you receive it, not when it is paid.

Bonus - the interest on the loan is tax deductible!

Texas is very landlord-friendly and also does not have income taxes. 

Secondly, the homeowner would need to cooperate as she would need to submit a bunch of paperwork including income statements, tax returns, etc. for the Short Sale application to show that she is insolvent.  

Tax-wise, profits are taxed at your ordinary income rate, and frequent flips may subject you to self-employment tax if classified as a dealer by the IRS.