It not a loophole, it's part of the tax code.I would ask your CPA this question, people not qualified to answer this could give you wrong info.

As a junior in possession they may work with you.  86k is not enough to do a BK over that would really hurt you going forward. worse that comes out of it is you know their position. its possible though that the property will bid higher than the 600k . if it goes to sale make sure you attend and watch the action very closely make sure bidders that qualify checks are not talking to each other and making side deals so the property only goes for minimum bid and you get nothing.. this is called colluding to stymie open bidding and in some markets it quite common.

I get more cash upfront, cashflow after my cash-out refi, and I net more on the sale because no realtors involved.Young family that the husband started a business 1yr ago so couldn't qualify for a mortgage, but they wanted to buy a home. 

You can get a million more applications on Monday morning, it's irrelevant if the applications aren't qualified. 

If you are developing ground up construction and have another w2...would that qualify yours a RE professional?

@Abigail Irvine so you don't show enough income to qualify for an owner-occupied mortgage, so that leaves DSR loans on rentals as your only option.At the minimum 20% down required on DSR loans, your $20k barely gets you to a $100k purchase. 

Loan assumptions generally require that the buyer be qualified for the product they are assuming and they don't work often on investments. 

My state law requires a 3-day "grace period" so I charge a late fee on the 5th.

Liberty area I currently make 70k and have roughly 20k to put down and I also qualify for a VA loan.

Please be gentle; I'm new at this and it's pretty complex :)Structure / Legal Details- we'd establish market value through a combination of comps from local real estate agent and an appraisal- attorney would establish all required "arms length" aspects including a mortgage at a minimum standard federal rate- LLC would pay us back based on a standard promissory note over 30 yrs Pros of selling to the LLC (I think)- A sale now would be the only time we'd be able to take advantage of the cap gains exclusion on this house bc we won't qualify for the "live there 3 of 5 years" rule due to the timing of our lease and our last time of residence.