Please note that the OP did not ask *how* to structure his agreement with friends and family - he simply asked if he could deduct the interest.  

How is the OP going to qualify for financing on a 2nd home with a mortgage on the first home?

Has the OP investigated a reverse mortgage to help his parents in retirement?  

OP you're opening yourself to a $500 fine.  2nd is a felony...

Do not know HOA/Co-op fees yet.4.  

I'm not sure where the OP is with regards to their investing career, but I wanted to reassure them that escape clauses do exist and should be used when the situation arises.But to reinforce your point, wholesalers should not use escape clauses to back out of deals.

Here is the actual Missouri statute (dated August 28, 2016) that answers the OP: LINKHere is the pertinent paragraph (emphasis mine):"2.

Jason Palmer I agree.Also, OP, I wouldn't have disclosed that I'm a newbie to him.

@Neil Whitney you don't have to go up in value but you pay capital gain taxes on the difference between like properties. what the OP is suggesting is to purchase two properties that would have a value greater than 650k, a 1031 doesn't have to be a 1 for 1 swap.

A lot of times these properties need fixing up like the OP has stated in his write up.