Otherwise you can make the mistake of buying the certificate on buffer land that the taxes will never be paid and you can end up loosing your money.

I live in one of them and I rent out the house in back of me.I was doing some research from the " Real Estate Investing" by the McGraw-Hill book and it said " Because real estate often provides a tax buffer between regular income (such as income from your job) and your real estate investment income due to depreciation, it is likely that some if not ALL of the cash flow from real estate investments will be TAX FREE"I have been reporting the income to my tax consultant every year but should I be doing something different and do I really get a different "tax break" because of the income that I am getting?

For now, read all you can and focus on acquiring enough capital to be able to make a good start with a healthy reserve buffer - don't spend everything you have on your first deal, you need a little cushion for the unexpected.

I use an app called Buffer.

You need a buffer to protect yourself against unexpected repairs or a vacancy. 

I would project my future needs and how much income is required going forward just for increasing living expenses just to have some working numbers for creating more buffer and stability in the future (to plug in to step 3)2) I would do things I usually don't get to do, golf, take the kids to parks and other fun family things, play basketball at the gym, sit around in my robe watching TV all day, go whitewater rafting, go on a spontaneous road trip, hang out with some old friends.

Just kidding, but I do put 20-25% buffer on man-hours, just because they are getting paid by the hour and who knows what Oops will happen, material wise I narrowed it down to only 5% contingency.

@Richard Warner @Taylor HorowitzTo me the real risk is not that a PM company is going to screw you (there are steps you can do to mitigate this) but the real risk is you lack of buffer in your Cashflow to weather a soft renal market or unlucky string of repairs or cap ex..

Obviously I love the appreciation that might occur but the only use will be to get HELOC against the equity so I can add more properties to my portfolio.For anybody who is considering that approach on properties in these locations should probably keep a bigger buffer in their HEKOC use than the 20%-25% the banks/lenders require anyway.

Because you can use the 16.5% as a buffer to pay off anything that comes along (maintenance/ fixing/ vacancy/ etc.).