BUT if you do you will pay tax on the difference.You've been told or you've researched and think that you will not pay tax on your original basis and that is correct. 

The whole nonsense of house hack every year and buy a new one, or what not whatever that **** was just does not apply in today's world with lower housing supply, higher rates, and wages being barely up.You're likely going to have to put 10-15% down, not 3.5-5% down, and wait 3-7 years not 1 year.

The no-income tax and growing city were all a plus! 

This will get you the best deals and lower your expenses.Buying your primary cash is a personal choice but not something that I do.

The general investment profile of recent investors are second home or vacation home buyers, typically from out of State or area, and looking to take advantage of the diminishing benefit of the 'STR Loophole' of accelerated depreciation to offset high W-2 wage taxes. 

@Jaron Walling I've noticed that lower ARV properties has been the trend lately.

Are you trying to lower your capital gains?

Trying to keep the logic simple if every house you own you can deduct 3 main categories on your taxes (property taxes, depreciation, mortgage interest) if I paid off a house I would make more with only two primary deductions.  

Yes, the right way as not to be taxed more on your property value.And do you need a bank account dedicated to the LLC?

The $100,000 cost of the original structure in 2021 would not be depreciated further because it was demolished.So, for tax purposes, you would only depreciate the cost associated with the new construction, not the original structure that was demolished.