You may not see it directly in immediate cash flow, but the income will be purchasing additional equity in the properties as you pay down principal on the note(s).Here is a basic Investopedia article on the topic of leverage:https://www.investopedia.com/articles/mortgages-re...While your statement is correct that the 401(k) will not have the benefits of deductions like depreciation, that is because the rental income is not being taxed in the first place since it is fully tax-deferred within the plan. 

Are there any legal tax strategies where I could sell my businesses, purchase properties with the proceeds, and defer/avoid/shelter myself from the business sale tax burden while purchasing properties?

There appears to be some deferred maintenance in the building but the location is strong enough that I believe this will make a good long-term rental. 

What if you have enough cash to purchase a property, are only getting deferred tax benefits from losses, and are well over 50 (meaning cannot wait 30 years to get cashflow)?

He was moving to the next base and was trying to FSBO at the top of the market and with some very minor deferred maintenance.

If this is the case, you might do a deferred application fee if they get under lease - this way you can still get applications completed and your fee?

There is only one process that defers tax on the sale of a piece of investment real estate - the 1031 exchange. 

Hi Kathy the other alternative without the dst “tie up” is through a trust instrument that can set up the installment sale for you, defer your capital gain, even indefinitely, and be able to invest in whatever asset class you like, in whatever time period you prefer.

I am also unsure of how depreciation recapture would affect you in this scenario which is why I defer to my original comment of keeping it with a good tenant and a 2 year lease.

@Ferryawaty Effendi We agreed on $390k and at current rents that would be 15-17% cash on cash assuming a 25% down loan at 6% amortized at 25 years.The location in 77707 isn't bad, right behind a popular strip mall area and across the street from 77706 and it is zoned for the good high school (but bad elementary and middle).However, there's deferred maintenance and a poor tenant base (owners didnt screen tenants) so that can be cleaned up with a new owner, but it's quite a bit of work regardless.