This loan would require you prove your income with tax returns, pay stubs, W-2's etc as well as the rental income on the subject property.

If the deals have enough fat in them, then I think that this could be a solid strategy, and I would then manage the property for my friend going forward, so that he just receives passive income. 

The second seller gets payments on a new note worth $1.35 million.You the buyer received the taxable income event from the sale of the first property.

I know on flips it is considered traditional income due to being classified as a dealer (someone who buys for the profit of the sale) and not an investor (someone who buys for the profit from rental or other forms of income) but what if you bought and renovated a property and held it for one or two 12-month leases?

Great for pure passive income.

Income will have to be from the new backyard bedrooms.

There is a low income $3K rule; I find most syndication investors are above that.   

This would be a great way to make the 30+ day stay work and enjoy increased income on the property.

I am in the process of selling my overseas properties so I have capital to deploy along with solid W2 income and great credit score. 

Another extension of this question that I also have is how much should I allocate from my income to save.