With rental real estate, you can usually deduct up to $25,000 in passive losses, like depreciation and expenses, if you actively participate in the rental activity.But here’s where income comes into play: if your modified adjusted gross income (MAGI) is $100,000 or less, you can take the full $25,000 deduction.

Even a typical water heat replacement would set you back signficantly.There's plenty to the puzzle that i am unaware of but with what you've outlined here i would consider passing on the property.you know you need managementyou know you need to remove at least one tenantyou know cashflow is meager after considering management.i personally wouldn't recommend a client take on the risk for such a paltry pay out out of state.Even when considering long term appreciation the average amount of headache one assumes with a property will bog you down before the long term play pays off.

This property also plays a strategic role in the broader development project for the area, which includes 12 patio homes and two duplexes.

My agent did not want to submit new offer at 290k as she thought it was a slap in the face to the seller and agent.

@Catherine Curtsinger To play a little devil’s advocate I have been house hacking for 30 years.

Their goals and upcoming upcoming purchases may come into play. 

Like with anywhere else: location, pricing and the overall house you intend to build will play a factor in your profits.

So, you're not "wrong" in thinking it's complicated.The tax code plays heavily into how certain transactions are categorized and there is some flexibility regarding what we can capitalize versus deduct.

Preference is cash-flow, but open to appreciation/equity plays as well. 

Each city’s approach can play a unique role, but zoning for higher density developments stands out as a powerful strategy, albeit a tough one to get passed.