I have a fairly decent job and I own a rental property that helps supplement income also.

I have a fairly decent job and I own a rental property that helps supplement income also.

Rental income should supplements your W2 not replace it until you are making more money than you can use.

The sellers are a retired couple that will use the home sale to supplement their pastor's retirement.  

The sellers are a retired couple that will use the home sale to supplement their pastor's retirement.

I would be selling it asap.Your only upside is speculating on appreciation but keep in mind you will need to supplement your tenants rent to make it work.$470 K in equity is costing you lost opportunity income of $3900/month (10% value).

If you have high earned income and can funnel some of the extra money into your passive real estate business to make repairs etc that supplements the passive cash flow, can you still write these expense of as business deductions, even though the money came from your earned income?

We have requested better info about why this is and expect that info today.Hi Anna,This doesn't seem like the deal that I would want to test if this is supposed to supplement your retirement income along with the long commute from the airport to the area. 

One thing to think about is that if you're contemplating doing a 1031 and buying a $500K investment and then converting that into your primary you will probably make even less than you are now on the investment house in the interim because you'll be trying to get investment cash flow out of a property that isn't best suited for investment use.It can certainly work but I sense a lot of other concerns than just the desire for a $500K primary residence.A lot depends on your geography but one option would be to do the 1031 and supplement with cash from the sale of your primary and purchase $500K of investment property free and clear. 

As long as family is living in it and you are supplementing their rent just consider it a gift to them.