Ensure you fully understand the tax consequences between LTR, STR, and flipping properties. 

No, it isn't legal to go onto a tax auction property.

They get taxed in the year they receive their money.  

This means that the income from the property can pay its expenses and generate a pre-tax profit.DSCR formula: Add up the expenses tied to the property (monthly taxes, monthly insurance, monthly homeowners association dues if applies, monthly principal & interest payment.

Something to consult a CPA about is the tax write offs.

Can't use bonus depreciation but could use accelerated depreciation and get most (not all) of my rental income tax free.

A lot of these markets are also landlord friendly and offer lower taxes as well. 

Then get hit with the capital gains tax, but then when you buy second property and live in there 2 years and sell, do you get to transfer over the 2 years no tax benefit since you did not use it on the first property?

1) Who's paying real estate taxes?

I use the rental calculator all the time to analyze deals as well as some of the other features and then write off the costs as education at tax time.