Any advice on what setup is easiest and most tax advantaged?

I assume there is zero or almost zero appreciation and that’s the reason you aren’t selling tax free?

Hi Steve, where did you get your property tax estimate from?

Recapture typically happens only when you sell the property.If you use the property partly for personal use and partly as a rental in a given year, depreciation and other expenses must be prorated based on the number of days it was rented versus personal useBased on the current tax laws and regulations, once you've taken bonus depreciation on an asset, you cannot "capture" additional bonus depreciation on that same asset in future years, even if the rates increase.In the 2024 tax year, the rate for bonus depreciation is 60%.

@Jeanette LandI always recommend using a tax professional.

What paperwork should I keep a paper trail of to make things like taxes and other situations better/easier for myself?

I am half expecting something to come up in the legal or building due diligence that kills the deal! 

However, this means you’ll need to comply with the annual filing, franchise tax, and reporting requirements in both states.

One thing to add is that when you buy a new build, your PITI will likely not be factoring in the correct state tax number.

Finally, even as the landlords cash flow increases, depreciation should keep a major portion tax deferred.