The aspect of the 20% limitation, the real costs of improvements are excluded and profits can be made at the 20% amount on materials and labor.

In case of residential real estate, it is 27.5 years.While this is not intuitive, the 27.5 years starts at your purchase - has nothing to do with the age of the property, and is based on the depreciating portion of the purchase price, which excludes the land.

**Excludes dissolutions outside of Nevada & Wyoming, as well as any state filing fees or shipping costs.LLC FULL SERVICE FORMATIONOperating AgreementsMembership CertificatesMembership LedgersState and IRS filingsCorporate Record Book Kit REGISTERED AGENTAccept and Forward Tax DocumentsAccept and File Compliance DocumentsRespond to Service of Process NotificationsHelp Make Sure Businesses Are i n Good StandingRenews annually at $135 per year per Entity

Lenders will even exclude all rental income from home rentals when valuing the property. 

And there is clearly an "intent" factor w.r.t. how your investments are treated, as our CPA pointed out when we were dealing with our repo house last year.Nevertheless, there seems to be a good argument that "flipping notes" isn't much different than day trading stocks and should get the same treatment.Rents from rental properties are specifically excluded from UBIT by the IRS.

Originally posted by @Joseph Cacciapaglia:Originally posted by @John Underwood:Originally posted by @Joseph Cacciapaglia:@Lucas Carl I'm curious why you exclude professional managers from your competition.

Are those all rental expenses including mortgage but excluding depreciation? 

If you are not doing that then you are standing still.Sophisticated investors re-leverage after their return on equity goes down.Cash on Cash Return on Investment (COC Return)The pre-tax year-end cash flow divided by the actual amount of original investment you have invested.COC is used to compare your investment with other options excluding factions such as the use of leverage (mortgage), taxes, appreciation over time, and mortgage paydown over time.

@John Johnson, I'd go no less than 35% on Op Ex (excluding Taxes) and use 5%-10% Vacancy (depending on location in LA).You'll find that affordable housing runs with tighter occupancy so I think 5% is ok for this project.

  #2 - Most professionally managed properties exclude individuals with evictions on their record.