This is just purely based on my walkthrough of the property and I have not had a contractor come through. .My investment criteria is $150 per month per door.

Later, it's sold and I receive 20% of the net profit.This is purely a money deal on my end (no involvement in rehab or rental).Question - If the property sells quickly (say, within 3 months), and since my profit is paid through a security agreement (I never have title to the property), how would this be treated for tax purposes?

Any tax advantages are merely a BONUS side product.The way I figure it, the OP should still be up for more tax each year than if he fell for the trap of investing into negatively cash flowing properties PURELY for the tax deductions and hope of future appreciation - but, not NEARLY as much extra tax than if he hardly leveraged his investments at all.

Then they do a quick conversion to condos in two years and raises the property value.Such buyers are most likely buying on emotions because they are purely looking for a nice home to live (not cash flow), possibly buying in that location because of proximity to family or about to start a family, etc; so they will pay top dollar.  

If you're only considering fixing the space and renting it to some other business which doesn't have any synergies, then this should be evaluated as a pure investment of capital, and you should weigh that investment vs. an investment in your business, which would yield higher returns.Also interesting is that you have very intimate knowledge about the distressed state of the seller, which most people will not have, and also pretty good knowledge about the building, as you've been there awhile.

It is obvious why she says that purely on cash flow.

That method is much more applicable to real estate that is used purely for investing - i.e. commercial or multi-unit real estate.

This will purely depend on the area.

It is purely a diversification play for the retirement plan, with all proceeds flowing to the retirement plan.An IRA may not lend to you personally.  

Now that doesn't mean that pricing was there, I really don't know without looking at a lot of data but at least in theory it should be unless people saw that the liqudity was a pure illusion.