You can do a 1031 exchange and use those funds towards another investment purchase (basically a tax deferment).

You may find that lenders expect to see the rents on your tax returns for 2 years in order to count the rents.You may have to talk with the commercial side versus the residential side.

Usually in the form of special assessments or ever rising dues/property taxes.

I own my own business/LLC and am open to changing that structure for tax purposes, such as putting it under an S- or C-Corp if it would help with this situation.)I appreciate any and all thoughts on this matter as I can't seem to get out of my own head on this!

So many nuances from property taxes, insurances, what does airdna or rabbit say, cost of internet, HOA, permit costs, local utilities, are you doing maintenance or is someone else.... 

Good luck and Happy Bidding.https://www.tax.newmexico.gov/businesses/property-tax-overvi...

And should they still file taxes separately or can they file jointly?

Mortgage, taxes etc amount to 1200 and HOA is 200.

More details:Mortgage (principal + interest): $2930/moProperty taxes: $15K/yearHome insurance: ~$1K/yrCost of home ownership/month: $4280/yr (not counting for any tax deductions related to the interest and property tax)If I account for $20K of interest and $10K of property taxes as an income deduction, then I can reduce the cost by ($30K x 35%) divided by 12 = $875 per month = $3400/mo cost of owning the houseRental income after 35% federal income tax + 9.3% state income tax = $2618/month (!!)

The basis could be the price their sister in law sold her house for 3,000 miles away; the amount of principal, interest, taxes, insurance, and repairs they put in (known as “make me whole”), an amount that makes clear they are not to be trifled with (“I won’t give it away!”)