Does this completely prevent the tax lien holder of getting additional gains after foreclosing? 

It's crucial to evaluate how the deal performs with the new mortgage:Updated Financials After Refinancing: Market Value: $250,000 Mortgage Amount (80% LTV): $200,000 Equity: $50,000 Interest Rate: 5% (30-Year Amortization) Assuming after 12months the rate will drop from 6% to 5%Monthly Expenses: Mortgage Payment: $1,074 Property Tax: $260 (4% Adjustment from last year) Utilities: $309 (+3% Adjustment) Insurance: $104 (+4% Adjustment) Vacancy: $105 Repairs & Maintenance: $105 (now after 12 months we can assume we have repairs at 5% factor on annual rent) Total Monthly Expenses: $1,957Rent Income after 12 months assuming annual rent increase at 5% : $2,100Cash Flow: $143 per month 😊Year 2 Return on investment $2,951 Principal Paydown year 2 $20,000 Property Appreciation (assuming 8% per year) $1,720 Yearly Cash Flow (this will increase as rents rise) $50,000 Initial Equity Total Gain $74,671 with just $ $22,789 remaining in the deal. 

Jim your also describing one of the huge benefits of being a transactional RE Broker ..

Having before & after pictures is a string tool when dealing with HMLs and real estate agents to gain business. 

4) would this also work to defer gains on fix and flips?

So your capital gain when you sell this property will be calculate against your tax basis and not against your mortgage as many investors expect.

You’ve gained valuable experience from your first duplex and are now approaching real estate with a strategic mindset

I think there will be a market for it and you will gain some market share, but I don't think there will be tons of profits coming in.

Here’s what you need to know:Key Benefits for Landlords1.

Being that I get taxed at a higher rate for wage earnings then i do for capital gains I actually take home more for way less work.