Seller financed deals.

This is most of the depreciation you are taking year one.You can calculate your depreciation recapture by taking the sale price of the asset and subtracting the adjusted cost basis.The adjusted cost basis is what you paid for the asset plus any improvements you made along the way minus the depreciation you took along the way.The profit above this original cost is taxed as a capital gain, but the part linked to depreciation is taxed at a maximum rate of 25% under the unrecaptured gains of section 1250.To recap the tax rates are:- Sec. 1250 real property: 25%- Sec. 1245 property and 15 year 1250 property: Ordinary Tax RatesThere are ways to minimize depreciation recapture especially if you know how to work smart with your CPA.1) Asset Valuation at Time of Sale - Sellers can minimize recapture by reallocating the price of the assets on sale.

Also, think about creative financing, seller financing and sub to can also be options to grow your portfolio.

I know there's seller finance and "B" lender that are good for the short term, but if a balloon payment is due say in 5 years, there's no guarantee that my DTI would be in a better place then I'd be stuck without funding. 

I am a realtor and wholesaler, and I get some buyers looking for owner financing, some sellers need/prefer getting cashed out and there are some lenders I work with who can provide the financing however they run out of funds sometimes.

You do not owe the seller any explanation on this. 

@Zach Howardthe wholesale hotline podcast was where i learned seller finance. 

Some of the best opportunities can be found in other regions, particularly in markets known for strong rental performance, stable property values, and tenant demand.

I'm not sure about the SD market, but I'm in Sacramento, and focused more on creative and seller finance deals that cash flow.

One thing I’m trying to figure out is how to find good locations where property prices are relatively low, but rental demand is high.How do you identify these areas?