@Kyle BarkerDon't discount an FHA 203K loan for your first house (even though you have VA eligibility). 

Are they eligible for financing there?

I get to deduct my interest paid to the seller and the seller has to declare the income.

@Song Choe if you were not sent an itemized statement of deductions within 45 days, they broke the law and you can take them to court.

My question is- if I only assign the contract and never take legal possession of the property, can I deduct my renovation cost from my profits for tax purposes? 

Unfortunately, it appears that Fannie Mae has taken notice. 6/5/19 - Upcoming HomeReady Updates.Currently, to be eligible for a HomeReady loan, the borrowers' total annual qualifying income may not exceed 100% of the area median income (AMI) for the property's location.

@Aaron MoayedIf you dig far enough into IRC Sec 469 and the related regs, you'll find this:Treas Reg Sec §1.469-1(f)(4)Carryover of disallowed deductions and credits(i)In generalIn the case of an activity of a taxpayer with respect to which any deductions or credits are disallowed for a taxable year under § 1.469-1T(f)(2) or (f)(3) (the loss activity)—(A) The disallowed deductions or credits is allocated among the taxpayer's activities for the succeeding taxable year in a manner that reasonably reflects the extent to which each activity continues the loss activity; and(B) The disallowed deductions or credits allocated to an activity under paragraph (f)(4)(i)(A) of this section shall be treated as deductions or credits from the activity for the succeeding taxable year.When reading tax law, what is not mentioned is just as important as what is mentioned.This Treasury Reg section, taken together with the IRC Sec 469 helps establish there is no definite carryover period for passive activity losses -- as opposed to NOL carryover.

Interest to the bank does get a tax deduction, but most of it is still 'rent'.

I would add to #2, that Multifamily apartments have an added tax advantage over ALL other commercial real estate, and that is the the depreciation schedule is on a 27.5 year basis, instead of 39 years like all other commercial properties.This allow a larger depreciation deduction each year, whether you use cost segregation to accelerate that, or not.

Especially since the tenant has been such an excellent tenant and was very understanding of some unexpected problems we had while they were living there (unless we find other major problems that we need to deduct).