How would this be accounted for for general accounting and taxes?  

@Stephen Fleming your cashflow probably won't be what you think it will be:(Have you factored in the new property taxes at homestead millage rates?

Once you start processing the credit/criminal, the money is spent, and you can't get it back.

Consider using an FHA loan to secure a 1–4 unit property with just 3.5% down and take advantage of tax benefits by living there for at least two years.

🌟Great no move to Multifamily With the same skills you can manage a 1M fourplexMore independence when you grow your familyStart the journey to bill wealth  if you have a 350,000 at 6% your wealth per year 21000with a 1M  your wealth 60,000 per year  3XBuy a 350$ houses you need to have good credit great Income personalBuy a 1M  Multifamily    (my unit 350$ same income)+ 2Unit rent is your income+ 3rd Unit rent is your Income .Same only that your roommates don't live with you.

There may be something called a "Due On Sale" clause.Check and see if all tax parcels are included in one mortgage or if they have separate mortgages.You have to have him spell out what he considers to be a "partial seller financing".

@Nicole GrazianoI recommend that you have a consultation with a real estate tax accountant regarding your taxes.Bigger Pockets is a great place to find a real estate tax accountant. 

Many community banks will give you credit for proforma rents.  

How do we minimize taxes on the profit we're making on this first home? 

It's a balance of cashflow and wealth accumulation.One of the goals is to have tenants pay as much of your cost-of-ownership as possible (loans, taxes, insurance, etc.)In high-cost areas, any Class A or B property you buy will usually negative cashflow for the first 3-5 years, until rents rise enough to cover the negative cashflow + rising taxes & insurance.Investing OOS increases your risks because you may not know the market and you can't check on everything/everyone all the time.If you move forward with your buddies, HIGHLY recommend creating a solid Partnership Agreement!