I can't imagine the lender giving them the money back "under the table", because then the lender is paying income tax on that money!

Rentals were a very attractive tax shelter.

@Donald Aleshire - conventional lenders do not require W2 income, they require a 45% DTI based on the income you reported on your tax return (last two years average)

Ones located in Greensboro Nc and the other is located in reidsville Nc the fees I see on this soft quote are: origination fee, underwriting/processing fee, 3rd party closing costs, 6 month tax impound, 6 month insurance impound, looks like 11-12k in fees alone.  

There can be a tax implication in one form or another.

If I sell the home, I could net $400k and pay no tax. 

@James BrandI recommend finding an accountant who specializes in real estate taxation and tax planning.

A completely paid off property purchased at a 6-7 cap, and appreciating at 3% per year long-term is a 9-10% return with very little tax.

We have been able to rent it out with zero vacancies for $3,300 month, with the mortgage, property taxes, insurance and other expenses totaling ~$2,900.

the fee is probably tax deductible as a business expense.Let us know the outcome!