Late in a market home ownership is usually maximized by legislation. 

Are you trying to maximize your profit at their expense?

I knew this would be an advantage going in, but I didn't understand back then how much of an advantage it was, or rather, how we could maximize this advantage as a mom-and-pop investor team.Our current plan, given the phenomenal appreciation of the property, is to move into it ourselves at some point and do a live-in flip, then use the cash to buy more rental properties that would offer us more of a return for the cash that's in the place and the gain that we can get out of it.

If the owner is very savvy he would have calculated that by structuring what he's doing for you he's going to be paying ordinary income tax on rent from a building that has probably maximized it's depreciation allowance. 

I live in the basement because usually the basement level is the "lesser" of the two levels so you can maximize the rental income of the property by renting out the "nicer" level for more money.You are also right that walling of the upstairs and the downstairs can be tricky, but some front entrances are set up in a way where the stairs to go downstairs are right there when you walk in the front door, so you put up some walls that you will take down when you go to resell it as a single family home and create a little foyer and then you have separate entrances.

So some of their replacements are minimal leveraged and some are maximal leveraged. 

Since being in California I have helped a couple flippers remodel homes and have learned more about real estate and I have decided I can utilize my construction experience/know how along with an aptitude for maximizing the potential in a building by adjusting layout and achieving the best bang for a buck possible.I've been working on a business plan and am here to get feed back and hear experience from people who have done what I intend to do. 

Hi Javier, I think the ultimate best way to save your money is to add a knowledgeable and proactive accountant into your team.The wholesalers are taxed very aggressively in comparison to landlords, but a couple of things that just popped in my head:- consider living/investing in a state with no state income tax- consider investing through tax-deferred plans like IRA- consider creating a corporation and make sure you maximize your tax deductions

I want to maximize my flexibility in terms of financing options and my potential to obtain a loan for the investment property.

Therefore, I want the lowest mortgage payment I can get to maximize Cash Flow without committing more cash to lower the loan amount.