Can someone help me understand a particular term, Bad debt.It is rent that is booked as rental income at the time that it is due, but subsequently unpaid. 

If it's in bad enough shape to not be lendable, you're going to have a lot of repairs and likely end up with very expensive money that will require you to use a contractor and construction draws.

What conclusions do you draw from these numbers? 

I can draw enough income without touching the traditional stuff (which includes some IRA funds) and plan to leave it untouched for the foreseeable future.

If I let my son live in the Texas home to take care of it in lieu of rent...can I draw up a lease between us?  

After the 5 years, I effectively own the property free and clear and can reap all subsequent cash flow.The major hurdles with this plan (that I can think of at least) include:- Creating complicated legal documents that attempt to lay out how much cash the seller is owed each month- Finding sellers who are willing to put up with the hassle of this type of transaction, especially for the smaller deals I am looking forThe biggest 'pro' to this idea, however, is that the seller gets residual income for 5 years (which may seem like an eternity to some people) and I, the buyer, accomplish my objectives in acquiring homes w/ less money down and setting myself up for cash flowing properties in Years 6 and beyond. 

Yes, I see draw backs, @Curtis Brown.

Also, I highly recommend having an attorney review any contract you're drawing up on your own. 

You need to make sure you have at least 6 months of carrying costs (interest, insurance, taxes, etc.) plus enough to float a contractor draw if you are financing renovation because your lender won't release the money fast enough for you to pay the contractor with it.

If that’s your question, the answer is yes - the interest would be tax-deductible.For example, if you buy Property A all cash, and then take out a HELOC on that property and use those proceeds to purchase rental Property B, the interest you pay on those HELOC draws would be tax-deductible against Property B.Hope that answers your question.