But the way you are describing it is very confusing is not incorrect.

You need to wait for rent and sales prices to balance out more or really work hard to find those deals.Here's a guide that describes what good cash flow looks like and how to analyze a property.https://www.biggerpockets.com/...

If they say no, which is very likely in a situation like you describe, it's up to you if you want to accept the risks of the unknown.

The other is the same but for income tax purposes.First, your accounting should be done in the way that best “describes” the subject transaction.  

Don't think the area would support 200k for the home I described. 

The way I started is exactly what you're describing.

They have something they called the "financial order of operations" which they describe as the various capital allocations you should make as you accumulate wealth.

A Q Sub election is not needed from what you described.

The situation you described as being in the middle of a BRRRR when the market drops would be less than ideal, HOWEVER, the second to last R, refinance, is the most important one in this situation.

@Antonio RivasThe BRRRR method describes a strategy that involves buying, rehabbing, renting, and refinancing an investment property—before repeating the process over again.