Owner didnt need a lot of cash out (he had recently sold a CA home) and is now getting same monthly income he had previously without the headache of maintenance and management.Building was poorly managed and rents waaaay below market, which is where we saw value.

Some time ago, I spoke with our corporate counsel and other attorney's I know at industry conferences over the years on sub-to they all agree it's a slippery slope.

Income would be roughly $12,706 ($16,800-$4,094) based on projected annual tax (Wake County 0.96% of AV (taxed at 0.5 market value)) and insurance (0.59%).

He initially said that because they were husband's wife he did not have to fill out an application and then I told him that all rental agencies in our town make them do it he grudgingly did it, but he's not said anything about his employment history and he has no current income

Depending on your income you might qualify for the "Small Landlord Exception" to take the loss. 

The income aspect is a little different though, because you will not be able to verify, or they may not show income on their application if they don't have any. 

Do you have the passive income to use for offset?

As our rental income is building up in the bank account now, we are wondering how to finance the next one.

Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

While the new property may bring in additional monthly income, the increase in your monthly net may not justify the amount of new debt that you would be taking on.