Should I just treat the net amount received as my "gross rent", and then deduct all of my expenses from this gross rent?

Remember mortgage interest is deductible, and RE has a lot of tax shields..

Like payroll deduction for taxes, if it's taken out before you receive it, you won't miss it.

If there are any payments required, make sure you pay on time and the checks are deposited on times, the date deposited is the date payment was made.Now, a year later you are then ready to rfi without a cash out requirement with valid liens to be paid off.Your parents need to be as protected as any other lender, they need to be added as lien holders to your insurance policy, without a recorded debt they could be an additional insured but as a lien holder they come before you or your estate is something were to happen.Next, having the debt is evidence for interest income for thier taxes and yours as to your tax deduction, you'll have one 1099/98 with this arrangement.Don't know if you are an only child, but if anything were to happen to your parents the recorded note and deed of trust will show the arm's length transaction for any estate issue, the same for you as well.Since you're doing construction, if you had a disagreement with any labor or material supplier your parent's interest will be ahead of any other liens that could be filed against your property by filing that deed of trust in thier favor.

ie=UTF8&qid=1367805423&sr=8-2&keywords=real+estate+investors+tax+guidehttp://www.amazon.com/Every-Landlords-Tax-Deduction-Guide/dp/1413317685/ref=sr_1_1?

Taking into account all my expenses (PITI, repairs, upgrades, etc, MY TIME), and all my gains (appreciation, deductions, etc), and then running a few "what ifs" based on investing all that money instead, I don't know that I'd go the same route again.

Some ok'd having the rent automatically deducted from their account every month thru erentpayment, others pay me thru PayPal.

If he sells to me now, he will have 2.5 years of the costly Section 1250 depreciation recapture (25% fed and 4.6% state) which he deducted while in a 15% bracket.

Also, you will have a hard time justifying that you made the payments and will risk not being able to deduct the expenses.

It basically allows you to take deductions in the year the losses occur and the ability to deduct passive losses against your ordinary income.