I thought It would be the perfect scenario to start my real estate investment because I will have reliable renters.

Every loan pricing scenario is unique in itself. 

@Mark NeigerHard to give specific advice on strategies without knowing your resources, time availability, and market.Poke around on BP for a while as this question has been asked many times.The only common denominator I've found with all methods is patience and persistence.Good luck.

I hope I am asking the correct question:If I am purchasing and improving a flip with the following scenario, how would the interest being deducted in terms of when I capitalize on the property?

The boat slips are rented seasonally, paid up front, and currently generates $2,000/month (when averaged over the year).Total monthly income: $11,250 ($135,000/year)Expenses run very low, from what we can tell, listed annual expense:RE Taxes :12,000Insurance: $6,500Water + Common Electric: $3,000 (heat and hot water is paid by tenant)Maintenance + Repairs: $2,000Management: $10,000If we do 40% down ($700,000) and finance $1,050,000 @ 4% over 15 years: $93,300.Add for vacancy, misc, etc...  

We have helped many investors set it up to remove the common mistakes people make on the platform.

The rehab is without fear because I will simply assume worst case scenarios, something that every average rehabber is scared of, "what is behind the walls" or "the unknown".

Perfect scenario, just give him notice, you don't even have to waste your time and/or money to evict.Nada

California but if I'm looking for the best cash flow the latter scenario appears to be the way to go.I guess I just don't know what I don't know.

I am assuming with this scenario, the IRS would distinguish the property as an investment property, and not as a dealer or developer property if the intent is to reap the rewards on the property appreciation.