1. you could structure it as interest only, and the lender would pay ordinary income tax rate on the interest paid. even if interest rate was 0% they would still pay around 4% (FAR rate) in taxes.2.

The IRS allows expenses that are ordinary and necessary to be deducted.

If 1.5 is out of the ordinary for your area then I’d go with your local norm.

Stains are not "ordinary" and should be charged.

Active = Income earned from Material Participation.Whether that's SMB, W-2, contract income, or prof real estate.This is income where ordinary tax is paid and losses offset other income.

If you are not in the trade or business of lending, the interest will be considered portfolio income.If you are in the trade or business of lending, the interest will be considered ordinary income.

For example, a garage, a large lot, a covered patio on foundation, etc. 

The home has a full basement with a bathroom ,back patio garage  4 bedrooms 3 bath 1700 sq ft.

If I take the commission out now, I need to pay at ordinary tax rate plus SS.

The property includes a screened-in patio and an underground pool.