Use tax benefits like depreciation, repair deductions, and tax-free refinance proceeds to offset income, and consider an LLC for liability protection.

The 1031 exchange will indefinitely defer all tax on profit and all depreciation recapture.

@Emily Gowen so as you pointed out you would not have to do a 1031 exchange on your current home to avoid the capital gains tax and coupled with what Dave Foster pointed out I think, speaking from experience you would have a high likelihood of success. 

It's almost like they tack on a few hundred dollars to the order and forget to charge sales tax

I'm starting out doing redeemable tax deeds and going to auctions where everybody has "bigger pockets" than I do.

I would be beneficial to determine if they are other aspects of the property that make it a worthwhile investment (tax, appreciation etc). 

What is the interest rate on borrowing compared to the rate you are earning, then take into consideration the tax consequences. 

If you’re interested in investing in real estate, you can consider doing so with a Self-Directed IRA to defer taxes on capital gains until you actually withdraw the funds from your IRA.

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall loss.

If you need financial help, ask under the "Finance, Tax, and Legal" forum.