Not to belabor the point but this is a great example of why it's important to know your state laws and adhere to them.

With this example, I'm flipping the contract, not closing. 

Remember, if you informally make it an inlaw (no permits) and you get a notice of violation (example, a neighbor or disgruntled tenant can easily turn you in) then you are really screwed: the city will force you to legalize that unit, and you won’t be able to just ditch it, or merge it into the main house (some political issue of reducing housing units.)

Here is the IRS publication regarding residential rental property which also defines when the asset is considered "placed in service" and with examples too. 

@John Franczyk on the tax front, there is no expense you cant write off, or business tax benefit that cant be taken weather you are an LLC or a sole proprietor historically, its all pass through anyway, for example if you have a HELOC on your personal home, and use the money for business purposes, the interest and expenses are deductible as a  business expense. at the end of the day it makes no difference, unless you are avoiding  SE and filing as an S-Corp, but thats for active income, not passive.

Hey @Jason L.using the example you gave, you won't have to pay any capital gain tax because you haven't had any capital gain on that deal.

For example, if you bought a 100K property with 10k of your own money, and it appreciates to 110K, you just made a 100% return on your money.

Here's a simple example: if my population is 100 people within a 3 mile radius, and my storage supply is 800 sf., 800/100 = 8 feet per person.

You can work with a list broker to customize the best target for your market. 2 examples for the Denver area includeSENIORS ready for downsizingAge 60-89Home value $100-400,000Purchased 20+ years agoSingle family homesHigh Equity# available in county: 3,115 -  Adams, 1,580 - Boulder, 3,951 Denver, 947 - DouglasABSENTEE OWNERS with High EquityHome value $100-400,000Purchased 7+ years agoSingle family homesHigh Equity# available in county: 2,255 - Adams, 1,784 - Boulder, 3,915 - Denver, 677 - DouglasDirect mail has been effective to help many investors find the properties that they want to buy - from people who are ready to sell.

A reverse exchange would be one example if the valuations justified it.