I'm very new to real estate investing as a profitable business versus a hobby and have a lot to learn so I'm anxious to hear any insights from you guys.Thanks,Virginia

You have to sell to earn short term profits and hold some for your long term gains.

Does this seem possible or are the legal ramifications too risky to pursue this?

So, for the tenants stay you would make in profit 3000 more.

They paid tax on $450K but sheltered the other $340K of profit, eliminated their mortgage and ended up with passive income for the rest of their lives.Option 2 would be To sell for $850k and generate $550K in cash. 

My partner and I will split any profit 50-50. 

As a private lender, how do you report the profit you make for tax purpose?

You are buying less than what you sold so the IRS views that as taking profit (boot). 

@Matthew DrouinThat is a great position to be in.Now with regards to the refinancing options and how much you should take out, I'd say it depends on what your plans are.If you are planning on holding onto to that rental for the foreseeable future, you should stress test that property to figure out how much minimum income it needs to generate each month to meet your mortgage payments.That monthly would dictate how much you can conservatively take out after refinancing (and providing that you lender is OK with that too) without exposing yourself.Now if you have other deals that you want to pursue and you need as much cash as you can lay your hands on, you should take out as much as your lender would allow you to.Personally, I'd go for the option 1, especially if you have the  ambition is build a sound rental portfolio.

I have hired a CPA firm, but was told the remaining questions I have are for Payroll processors or HR experts and not CPAs.My wife is the sole-owner of the S-Corp, but will also be the sole employee (as she has to pay herself a reasonable salary prior to K-1 profit distribution).