I am reporting loss of the depreciation left as ordinary loss.

The difference between an active investor and real estate professional is the amount of tax losses you can deduct against your ordinary income.

If you do get classified as a dealer (and, if you do multiple flips, you will), the calculation is identical, because the houses are inventory, and the income is ordinary income.An s-corp may be able to help with the SET.

In an area with a lot of older (like me) folks I would think that 2/2 patio (zero lot line) homes might be a good bet.The don't like yard workThey've probably "downsized" and sold all the crap they were keeping in a storage facility.Smaller house equals smaller utilities.The downsize is that this demographic is made up of a lot of people from the RICHEST generation that ever walked the earth, so they tend to buy,not rent.

I imagine that will also prevent the IRS from potentially classifying the refinance as an ordinary sale and taxing 15%.

You should end up with a positive cash flow, but an ordinary loss on paper (and your tax return)!

That means you will not get capital gain treatment on the sale, it will be ordinary income.

You're going to pay ordinary income plus.  

You will pay ordinary income tax rates on the depreciation recapture and you will be allowed to take capital gain treatment on the gain not from depreciation recapture if there is any.

Reason being that as long as net profits are less than $50,000, the tax rate is 15% which can be much lower than your ordinary rate in which S-Corp, LLC, and partnership income are all subject to.