J Scott, a friend of mine bought a company with accumulated losses of around $5 million in order to save on taxes.

Accumulate enough cash so you eventually become the buyer and then sell to your A list of buyers for whatever you charge.Learn as much as you can from a couple of trusted sources and stay away from late night TV.  

Here's why.1 - By now, the current owner has made a lot of cash flow, and paid off a lot of the debt increasing the equity quite a bit, resulting in accumulated profits.2 - Profit isn't based on the spread between what you bought it for and sold it for...it's based on the spread of the accumulated profits and what it was sold for in the end....here is where the difference mentioned above comes into play,...3 - The impact of the cost for the upcoming CAPEX on the current owner is the total of all the CAPEX cost at once...and completely out of pocket.4 - The impact on a new buyer, using leverage (a loan), is spread over time (30 years) and taken in pieces out of the cash flow...as in,...Cost to Current Owner = a one time lump sum of $10,000Cost to the New Owner = an additional $53.68/month on the mortgage.

Its exciting to share some success for people who are new to investing and want to try and accumulate passive income through leveraging assets.

Based of course on the assumption that your earnings will be relatively high to offset the amount of debt you've accumulated.

Llong answer to a short question, we have been using the cash flow to A) build the emergency fund and B) to save up as we "go wide" in accumulating SFRs and C) we then "go deep" and start paying down and then paying off houses. 

All of this was many years ago, and our entity structure is MUCH more elaborate now and pretty ridiculous at times, but I have earned that ridiculousness over the years and the assets we have accumulated and businesses we have started.Bottom line, LLC's in my opinion are great for liability protection PLUS make you look more like a business, and not a hobby. 

I like to think of it as I'll just accumulate cash and sit on the sideline learning until I find the right pitch.

I hope to purchase my first rental at the end of next year and trying to accumulate as much knowledge as possible.

Michael,If you plan on building a management business while accumulating your own property, a management software company such as Buildium may be helpful.