The difference between the two treatments is whether or not you pay the 15% self-employment tax on your profit.Still, I side with Ashish in recommending professional help, as my suggestion needs a more detailed discussion before implementing, with a few pitfalls to address. 

@Clay SellersYes, that old 401k may be moved to a self-directed IRA.Strategy matters a lot. 

I think that would be sufficient to include the well and septic into that 10%. 

Find a local self directed IRA group in your area. 

We are interested in self directed 401K information and we have questions about cashing out a pension or rolling it over.

You may be able to start by self managing, since the tenants seem stable. 

big difference on somehting this small.how many rentals, what are lot sizes, age of homes, are you willing to self manage...because that is what your probably getting into to.

My question is will I have to pay self employment tax such as medicare and social security on my profits?

My second spreadsheet is mostly pulled from census data/trulia/zillow (so I take the numbers with a grain of salt) but it lists on the X axis the zipcodes as well as the county as a whole.On the Y axis it lists: average listing price, median sale price (90 day period), median sale price versus last year, price per square foot, price per square foot versus last year, median rent per month, vacancy rate, annual property growth value, number of rentals on the market for that month, median rent versus last year, median rent divided by 1BD/2BD/3BD etc etc, median age, median household income, school districts, single residents, college educated percentage, percent home owners, population growth etc (there's more but I feel this is sufficient to get the point)3.)

Looking to get into using private or self directed IRA.