He makes 35k and you make 35k profit on the deal and are both subject to SE taxes and ordinary gains just different ways it was derived.

Typically though an appraiser will use a income capitalization approach on an income producing asset.Essentially value is derived from the Income - Expenses = Net Operating Income and then a cap rate gets applied to it to determine value (cap rate isn't a sole indicator of value just one of the many parameters that people look at).Feel free to DM me some details and I can assist, but it varies market to market.  

@Michael Sanchez   start with lender who is local and you can go to their office and meet them. rates are derived by supply and demand and are different throughout the country.for instance in CA.. were the supply of money is HUGE  rates can be 1 and 7 or 2 and 8..

I have a wealth of understanding in real estate investing strategies that has derived from working with some of the best and most prominent real estate investors in the local Omaha market.

I admit my focus has been on the former area of expertise since I derive most of my income from a corporate gig.

While there is some truth to what's being said regarding homes being torn down at what appears to be a rather pre-mature time, especially in comparison to North American homes which may be in use well over 100 years, a lot of the information contained is reflective of theory - derived from a predetermined "depreciation" formula established by the government, in essence, to keep the economy humming.The basic formula was determined by taking the age of all the homes that had been razed, and averaging out their age.

Until the profit you are generating is in excess of what you would consider to be your reasonable salary you will not derive any payroll/self-employment tax savings.

Your deduction amounts to a % of the interest paid and your income should always be ahead of that so all you really do is reduce you actual interest expense, but if you reinvest the money it will add to your income derived from that investment on an after tax basis foryour cost of money.

Here are some interesting metrics derived from Census data for Cumberland County which contains Fayetteville.  

These are the percentages, derived from the facts--hundreds of tenants spanning a period of many years.