I'm working on some hard money financing with a family member to do a deal.Under what circumstances, if any, are my interest payments tax deductible?

Because of this, in my taxes, I did not classify this property as a rental and therefore was not able to get any of the tax deductions that rentals qualify for.  

My real estate agent has not heard of this and I’m baffled as to how they can legally add an expense that I do not have.Is this standard practice?

I can deduct mortgage interests3.

These numbers seem significantly higher than the “standard” scenario.  

Does it make sense for me to follow his standards in a city and area like mine?

I have become accustom to my standard of living and where I live, and I wouldn't want to downgrade if I really don't have to.Some are HUGE proponents of doing so, so it your case, theyd rent the home, then move into, say a duplex and do the househacking method.

Since states have different requirements for credits and deductions, I'd check what KS offers..Once all this is securely in place, then I'd start looking for first deal. 

Now my sweet spot is bringing the exterior up to current park standards and cleaning and getting the interior "ready for rehab".

It's just a standard tacky McMansion that wasn't well built.