Based on deals I have done, capital gains comes into play and is typically 15% but that also depends on your income and if you had any losses.

Perhaps offer to share some portion of the net rental amount above the payment and strike an arrangement with her to split the proceeds when you sell at some point in the future when the market recovers - it will, it always does.  

All it says is that, on average and across lots of units, long term, about 50% of gross income will be used to pay for expenses, rent loss and capital costs.Whether you will be able to find good deals in your market is completely independent of the 50% Rule."

Bottom line, seller financing, ownership reverts back from a default and cash loans create a lien interest or title interest intended to allow a lender to recover their advances, to be made whole, not to become a predatory dealer in that collateral.

Jason,I think its a nice idea to think about the tenant because turnover cost and rent loss can eat you up if the PM isn't doing his job.

That's a big paper loss, but does not mean that the loan will be called due.  

So there is a 1600/mo loss in income.

In insurance terms, this is called "mitigating the loss."

I just became aware of a situation where a family friend and her mother have offered to short sale their home with no regard to loss of their initial $20K down payment and damage on their credit due to the fact that they're up in age (one is over 100 years old) and they see no other recourse.How can I advise them of a different strategy to resist the temptation to give away what is essentially a really nice home that needs minimal TLC in the Oviedo FL area?

It means the Borrower will not be liable for amounts due but not recovered from the property by the Mortgagee.