I'd bet that this note is worth more to you than to most buyers until the note is much lower LTV, but I'm a novice in this space.

Basically, there's no free lunch when it comes to taxes.Depreciating property lowers your tax basis.

If I were you, I'd pass on this property and look for something else (and I suggest a 3 BR) under $80 that you can put a little rehab into, unless insurance pays your family member a bunch of money and they accept a much lower price. 

I would remove debt to a 7-10 year time frame and lower fixed costs, at minimum.

Rentals are extremely difficult to make pencil right now but would only personally consider higher end projects because the costs are far easier to absorb than trying to build in lower value neighborhoods.

aim for a good house, not a cheap house as it will attract lower quality tenants and cost you more in the long run.

Possibly lower returns than projected because of statutorily mandated interest rates following court judgements.

A smaller mortgage means lower overhead, which is crucial if you’re worried about vacancies.

What entry point do you usually do business in?

There are some pockets in this lower price range but they are hard to find and sellers won't let them go for the price you want often.