You are calculating it backwards :).

While looking at it backwards, it's still the same question- leverage or pay cash?

I read the laws frontwards and backward then speak to a real attorney in the specific state I'm renting them before I do anythingMI would recommend you do the same

But on the other hand, I've bent over backwards trying to validate her claims and there seems to be gaps that I cannot answer.

Is that backward thinking?

They've written a tax code that bends over backwards to help him.

Then work backwards (estimated ARV minus the bank's payoff as the  plus your estimated rehab)  and see if there's enough room for you given your own risk tolerance.If the payoff of the loan is 178k and the house is worth 260k, you still need to know what the estimated rehab is to see if there's a deal.

Life punishes those who are vague, so have your goals be of what, how much of, and by when kind of things from there it is creating the plan to match the goals and working backwards and fighting to attain them.

I would keep working the numbers backwards from where you want to be, and ROI needed in regards to the contributions to the vehicle you are using to get there.

Work it backwards and find out what it is.