Only if a person has a massive active income, providing for significant excess capital yrly and a sizable tax liability does it make any sense to engage in other focus. 

My buddy on the other hand, follows my advice and reinvests the returns to the point where the cash flow is so excessive that a roof, furnace, foundation issues etc, doesn't even put a dent in his wallet.

Up until then I was cheerleading the earlier thought experiments about supporting lean/regular/fat income with ~$1000 / month per paid off SFH, thinking “I could bang that out in 5 years”.

Any excess proceeds not applied to the investment portion may be taxable as "boot."

We can draw this conclusion when we see the offering in question showing projected returns far in excess of what we know is achievable without an undo degree of risk. 

I like to look for board orders, excessive fines for weeds/grass, stop orders, and unsecured premises. 

Can stay in the same budget and use the excess to invest or trade up.

A good rule of thumb is to keep 3-6 months of operating expenses in your rental account as a cushion.Once you’ve got that covered, you can start investing the excess.

Are you only referring to damages in excess of the deposit?

I looked back at my tax returns when I was doing the conversions from my traditional IRA to my Roth IRA and realized I had converted up to the limit of my standard deduction allowing that amount to be tax free, but the excess above that that I converted each year was at the lowest tax bracket, so while I did convert some money tax free each of those years I DID IN FACT pay more than a few cents in taxes on the amount above the deduction.