Remember we didn't add in the tax benefit or the additional cashflow from rent increases or the possibility that inflation is higher than 2% non-compounded.This is an ordinary property turned into a super charged investment because of deal structure.

Plus the profit is taxed at the ordinary income tax level, say 30-45% plus 8-10% state tax, it makes it even worse.I think that major mistake that investors make is when they score a home run once in several months, they neglect to calculate the true cost and earnings of their time.However, making 8k before tax or 4k after tax, is still better than nothing.

.*  If you've historically had more passive losses than passive income, then you weren't able to deduct the excess losses against your ordinary income, and your losses were "suspended" until you have enough passive income to be offset by them or until you dispose of that property, in which case the suspended losses are released.  

You will note however that IRS form Schedule E (where you report rental income) does not have a line for Travel costs because they are not typically ordinary or necessary expenses in a rental activity.Here is an IRS explanation and you can see how it fits your situation: https://www.irs.gov/taxtopics/tc511.htmlI have had many clients ask this question over the years, if you are audited it is the first thing they will look at and likely the first expense they throw out. 

The family I know that have money to lend are a) prohibited by the IRS to loan to me out of their IRA/401k and also b) financially savvy enough so that an 8% loan is not attractive to them because they know it will be taxed at ordinary income levels, when made outside a tax deferred account.  

Buyer shall exercise either option by written notice delivered to Seller within _____ days (3days if left blank) after the physical inspection of the Property.(2) If Buyer requests Seller to correct the specified unsatisfactory conditions, Seller shall respond to Buyer by written notice within _____ days (5 days if left blank) of receipt of such request as to whether Seller is willing to correct the unsatisfactory conditions.(3) If Seller elects not to correct the unsatisfactory conditions, Buyer shall respond to Seller by written notice delivered to Seller within _____ days (3 days if left blank) of receipt of Seller's refusal to correct such conditions and advise Seller of its election of either (a) to terminate this Contract and recoverthe Earnest Money pursuant to Paragraph 3 above, or (b) to waive in writing the request for correction of the conditions and proceed to close the sale.(4) It shall conclusively be deemed acceptance of the Property, including ordinary wear and tear until the closing, if Buyer fails to notify Seller in writing within the allotted times stated above of any unsatisfactory condition revealed by the inspections, or fails to notify Seller in writing of Buyer's election toterminate this Contract as herein provided.

I rarely use home inspections, unless something seems out of the ordinary or it is more than 4 units.

LTR rent is passive, STR income is ordinary,  correct? 

"We also deceided we should remove the decks and replace them with cement patios because the decks were in poor condition

It would be taxed as ordinary income no matter what.