I could be wrong.What you tell contractors is: if you do not separate labor from materials, then I have to report my ENTIRE payment, L&M, to the IRS as your income, and then it will be up to you to deduct materials from that income on your end. 

@Paul De Luca PITI 11.4k, Gross Income (once I move out) 12.5k 

Start to evaluate deals based on the income approach and you'll do much better long term investing. 

So it comes down to how much you currently value your time.

Basically wholesaling would've been the best but there is alot of negative comments about wholesaling this days.So what is the best way to make small income with $0 from realestate and also grow along the way?

I don't want to refinance because my current rate is under 5% and doing so ruins the cash flow I've got right now.

Essentially I am looking for a clean way to organize everything as right now its very messy with how my current accountant is working things as he doesn't specialize in real estate.

The average 1st time homebuyer is 37 currently.

Quote from @Marc Zak: In the market where I live (San Diego), appreciation has been strong and many predict it will continue to appreciate in the long term.However, with current interest rates (6% at best) and property tax (2%), the annual cost burden is 8%.Am I correct in saying that appreciation has to be above 8% annually (plus whatever my maintenance and vacancy costs are) for me to make any money in this scenario if the property is cash flow neutral?

Will be difficult because you currently live in the property . is the 2nd unit livable and just looking to renovate ?