As you go down the scale of desirability, the price goes down, until you reach the small station, in a bad location, hard to get to, in a low income neighborhood, with environmental compliance issues.  

I work with a commercial lender that loans based on the property, not your income (no tax returns or W2's). 

This is a great opportunity for a leasing agent to really learn the business and increase their income.  

Generally houses are sold for market value as determined by comparable sales not net operating income.  

I will do some of that but after listening to some BP podcasts and doing some general Googling I feel that I can supplement my income nicely in the flip or rental game.

My intent is to develop some passive income through rental properties and also flipping.I'm finding the information on BP to be awesome and so glad I found it!

It's more expensive, but has significantly less paperwork, requires little to no income documentation and the construction financing will be paid out in draws.  

How should we go about doing this and how should we record rental income for the first year and record taxes?

Also, if your parents are listed as the owner, then they will owe any taxes on any taxable income from the rents, as well as being able to deduct the depreciation from that income. 

Or worse yet what if the person is "willing to pay above market rent" because they have bad credit (doesn't intend to pay), no verifiable income (can't pay), or a track record for trashing rentals?