Wanted me to pay for all their supposed expenses by reducing the rent.

Obviously, the interest I earn from lending would be taxable income, but how would the initial investment be treated for tax purposes?

However, one of our objectives is to reduce the tax burden we face on our W2 income.

She could sell the stock and use those losses to offset some (or all) of her gains.Invest in opportunity zones - Likely a qualified opportunity fund - This could defer and potentially reduce the capital gains but there will be hoops to jump through and rules to followHold the note when selling the property - Spread out the capital gains over a predetermined mortgage period. 

(And then you’ll just have to make $25k for every year it took you to “catch up” to make up for the lost CD income.) 

Having burned with few tenants, I am considering to tenant income and asset verification on top of regular background check.

I believe this is considered active income.

The next house will bring in passive income (rents) and that plus the equity it builds can wipe out debts fast!

A DSCR loan, or Debt Service Coverage Ratio loan, is underwritten to the property income instead of your personal income/taxes/debts.

The next step is to pull out some cash typically a cash out refinance and use that cash to put down on another investment property.Are you strictly using your liquid reserves/earned income to buy versus using the equity to pull cash out?