In terms of taxability, from my understanding, if my business partner and I are to live in the property for at least two years, there will be capital gains exclusion up to $250K for each of us. 

In all honesty now i would do the following at first glance:Become a full time investor.Invest $1,500,000 - Purchase Municipal Bonds at 7% tax free interest = equivalent to 10% year over year return in a taxable bond.

Even with depreciation, you can still have taxable income.

This is taxable, too, though depreciation allows you to shelter some of the income.

Seems like you can get $20k cash out tax free instead of $30k to $35k taxable capital gain.

Passive income is rental income or income earned from interest payments or other type of investment which provides you with a good deal of deductions and lowers your taxable income.I don't believe holding a real estate license will impact your wallet other than if you were employed by a broker?

Real estate activities considered engaging in a trade or business activity such as flipping, wholesaling or new construction/development are subject to Unrelated Business Taxable Income.  

Unlike a self directed IRA or 401k where the investments are at arm's length and all returns accrue tax-sheltered back to the plan, this business will operate in the taxable realm.  

Most lenders will require two years of tax returns and average your taxable income.  

Make gross was 160K and taxable was 130K (30k in marketing).