Maintain a personal reserve that enables you to handle ordinary maintenance and emergency repairs.How much reserve should you have? 

Result is I claimed 15,000 depreciation which when I sell, i have to pay tax at ordinary income tax rate.If i do not claim "active participation", then the 25,000 will be carried forward as "suspended loss", and if i sell my property next year, the 15,000 depreciation that was not used can work to reduce my depreciation recapture income / tax. 

@Cole Britting Be careful with Seminole as that municipality does have regulations against str.

The income from the flip is ordinary income.

The interest you are earning from investing (mortgage lending) is taxable (worst yet, I believe it is taxed as ordinary income).If the seller is not paying any principal, this really doesn't minimize your capital gain tax bill over time.

My business partner is a Brit.

The lease terms are typically about 2x market rent for an ordinary SFH and the leases are typically 3-5 years in length so they provide much more stability and less vacancy overall.

As others mention they will pay tax (ordinary income rates) on the interest payments only and once they exceed their cost basis they will also pay tax on whatever is above the basis. 

I know intent is what determines if this will be classified as ordinary income or capital gains - how is that intent determined?

I'm assuming my returns from "being the bank" would be taxed as ordinary income similar to that of a REIT?