all materials, all labor costs to others, Not you, utilities, interest payments, permits, licenses, auto/truck expenses, tools needed are all deductable. 

I could be wrong.What you tell contractors is: if you do not separate labor from materials, then I have to report my ENTIRE payment, L&M, to the IRS as your income, and then it will be up to you to deduct materials from that income on your end. 

Whichever loan that you decide to use, the interest will be tax deductible due to interest tracing rules.

My target is 8% plus for properties less than 10 years old as I want to take advantage of depreciation deductions.

This is also tax deductible.

Purchase price: $85,000 Cash invested: $33,000 Cash flow is after all expenses including vacancy, maintenance, and capx deductions.

@Tyler Garza Your strategy is a solid start, but avoid using a corporation for rentals due to double taxation and fewer deductions.

"Good about deductions" sounds a lot like "doesn't make enough money to be a homeowner", so he should keep renting from someone else, and you should do what you're going to do with the money and wisdom you earned.Of course I don't know your son, but I think this is too dicey and you are too close to the situation.  

Deductibles- make sure your deductibles are as high as possible. 

You could also do a cost seg on the $500K sale which depending on what the dirt is worth you can take a large deduction year one of renting it.