You will survive. good underwriter looking at your tax returns will see you own the debt and the asset.. probably gets bounced.. this is what HML did pre 08 all of our loans went to buy and hold folks and we did rate and term refi.. but we were a true third party lender .. its was a great gig while it lasted my average turn on my loans was 92 days.. and the buyers not only had no money in the deal they got refi proceeds usually 5 to 8k a house and they would do 4 and a time.. now they were suppose to take the refi proceeds and put them in their reserve account.. but alas the reserve account ended up having Jets skis in them instead maybe a new car.. or that trip they wanted to take.. etc etc.. anything but where it was suppose to go.. 

Obviously this is extremely difficult, but automation is quickly gaining traction so i try to account for that.

That is why you have to trace the interest on where it is used.3) If you have another trade or business and deposit the money in the business account, there is an exception on not having to trace the interest if you have used the proceeds within 30 days.

When I have previously checked into this with my accountant it seems their are very specific tests to pass to be considered a materially participating passive investor, namely that you must spend half of your time and at least 750 documented hours in passive real estate to qualify to deduct depreciation. 

My objective is to build a relationship with an accountant who can point my wife and I in the right directions in order to lessen our tax burden as much as possible. 

Real purchase price - $3500Rehab - $4000Lot Rent - $164 per month Mortgage - paid cash Insurance - $350/year  or $30/monthProperty Tax - 653$ per year  or 55$/monthRent - 575$/month  - never been late never missed payment I manage my properties at the moment so I am putting all rent money aside for repairs and re-investing 326$ Left for the account every month After this property went smoothly. 

I suspect that other factors come into play when making a decision about this investment and I have plans to take them into account as I continue my analysis.Okay, on to the main topic of discussion.

How about the cost to maintain an LLC if you have one, accounting costs, or bank service charges? 

I agree with Account Closed above.

You create systems so you don't have much time needed to manage (even remotely) and you save the PM fee.My tenants pay via Zelle or they deposit into my account at my bank.