🧮It sounds like you have these priorities for your next PNW property besides the standard FI road map:- Something that has positive ROI (appreciation + cash flow + tax deductions + loan paydown) purchased at $1M with 20% down and ~6.8% interest.

Yes there are loans specifically for STRs if you need any help with that let me know.

My end goal is to relocate to TX and in the interim , if I can use this opportunity to hold on to one door as a rental property( my current home ), I would like to assess the financial merits and demerits of the same.

You are not in a financial position to maintain, manage nor service the construction nor operation of a duplex/triplex rental investment.

If a loan gets called, my end buyer is totally screwed because I don't have the resources to pay the bank or refinance.

The wife does not work so the financial responsibility would fall to the husband.  

If I take over this loan through a subto purchase, does the tax exemption remain in place or would I have to start paying taxes?

Let me here what you would do with the scenario.Purchase Price:40KRehab: 40KTotal Loan From Lender after Rehab: 80KARV: 130KFair Market Rent: 1,200 Mo.If this was your very first purchase, with a goal of wanting to scale, and build a portfolio based around LTR, and Fix and Flips.

Also wondering if I can get a second loan (Commerical) looking to go bigger with a 5+ unit building using the 75% of profit from first one. 

I found there was loans taken out using a 3rd party that was disguised or hidden on their taxes.