Hi @Eric Schwake I think a performing note in your SDIRA would be a good option since the interest income is considered ordinary income not taxed assuming a Roth or deferred if not a Roth.

The black mark on the fence would normally be chalked up to ordinary wear-and-tear unless it were egregious.

Yes, if you sell after owning it for a year and your intent was to hold you will get capital gains treatment rather than ordinary income. 

Am I understanding correctly that we’ll owe ordinary income tax, but since we’re living in the property, we -won’t- owe self-employment taxes?

While I lived there I replaced the flooring throughout the house, I painted the garage floor, had a sprinkler system, sod, and a concrete patio put into the backyard.

In other parts of the country where I've lived, Las Vegas town homes would be called patio homes or attached homes.Out of the ~100 town home complexes in Las Vegas, we only like a very small number.

It has a nice yard and outdoor patios for all units. 

There was added sq footage on top of what use to be carports and a patio that wasnt permitted.

You are correct, income from note P&I and any other borrower payments are considered ordinary income.

Interest income is ordinary income taxed at the highest rate.