Say that $500k is invested in a new trade or business - now it is business interest expense. 

I would tend to agree with the other CPAs typically.The 500-hour test is one of seven material participation tests used by the IRS to determine if a taxpayer is actively involved in a trade, business, or rental activity. 

However, smaller projects or certain trades might not require a license.

Depending on your credit score in the US and credit trade line history, you could put as low as 25% down.

There's always trade offs when it comes to investing and one of those tradeoffs (if you want to find positive cash flow) is having to be okay with an older house.

Mom is a real estate agent and dad knows the trades.

., you will come out on top just take a bit longer so you need to underwrite that in mind.If the former, I would do a combination of fixed income, private lending, and note buying and trade the arb.

If this is not something you're interested in delving into and learning to a high degree, then investing in publicly traded REITs would be another good option for you, which have historically returned about 13.5 per cent Per year over the past 50 years (1977-present), beating the US stock market by two per cent and even beating private real estate investing by 4 per cent (that's compared with the average real estate investor, not the experts here at Bigger Pockets).

We don’t want to find ourselves as a Jack of all trades and a master of none.

But you trade that for interest rate risk.