@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. 

.🔹 Property Tax Relief – If your property is severely damaged, you may qualify for reassessment and potential tax refunds.

How is it a tax strategy though?

You also don't have to pay state tax on income. 

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

example:Purchase Price: $70kRehab: $30kARV: $200kRent: $1,500I can pull out up to $150k but with taxes and insurance I’d be in the red.

If you were able to increase the value of the property significantly after the rehab, then you could bring the deal to a community bank  to refinance and take the hard money lender out.You keep all the equity and don’t have to file a partnership return for your annual tax return, which can be costly.  

It is what is left after snow removal, cutting the grass, utilities, tenant issues, parking lot issues, property taxes, mortgage payment, etc. that make a difference.

You'll also need to show stable income for the past two years through W-2s or tax returns.Talk to 3-5 lenders to compare their rates, fees, and terms.

I make around $110k+ per year, live off around $75K, have a mortgage ($1900/mo for rent, escrow, tax), around $40K in equity, and no other debt.