there is no capital gains tax as you have not realized a gain, while you still have ownership.

Now if you just want dividends a solid REIT could turn 300k into 20k annually pre tax as well.

On the flip side if I create an LLC in Florida, I will have to pay 138$ or so per year tax + 800$ California Tax as against if registered in CA then just 800$ a year.

I'm still learning myself but I think one of the bigger benefits for the seller to do seller financing is that they do not have to pay huge capital gains tax as if they sold the property straight out.

Fix in flips where the primary intent is to resell do not qualify for 1031 treatment either.Flipping is a tough game - takes volume and velocity and an indifference to paying lots of tax as a cost of doing lots of business.

I think it's an overreach to tax a California resident an annual fee on an out of state LLC that owns only out of state property and is managed from afar but I keep hearing that CA is assessing this tax. 

Do I need to register for business tax as well?  

We ended up holding that property 15 years. the timber went from 30 to 40 years old to 45 to 60 which is prime age for that growing site and sold to Stimsom for MANY millions of dollars.. did we have cash flow NOPE.. we cut a little timber along the way maybe 50k a year.. tax as you said were less than 2k in timber deferral.. a year..  

If a property is 75% debt-financed (not realistic with non-recourse lenders that will typically only go to 60% LTV at most) then 75% of the income is considered taxable and 75% of the normal deductions are applied to offset that income.It is possible that if deductions negate income there can be a zero or negative tax.  A

My logic for wanting to set it up this way is :1) I am putting all my life savings into this gig (300k plus CASH savings)2) The business profits will be taxed, so I will be paying quite a bit of tax and it will be hard for me get my initial investment back quickly.However, if I loan my $ to the business at a nominal rate , I can get my initial investment back in the first few years - This will reduce business tax as the loan will be an expense/liability for business and the 300K plus principal returned to my savings will not be taxed on my personal business income.