Once you find the deal then you can adjust the rental income and expenses to account for you living there.  

I assume this would create a big difference on my tax liability since it would be cap gain vs ordinary income.

What is your marginal propensity to spend outside your disposable income?

Hey Biggerpockets family! I am trying to think of creative ways to raise money for a down payment. As a way to improve my deal finding skills I thought I could find deals in different markets, advertise it, and then i...

The BP forums, podcasts, books, and meetups have helped me gain a better understanding of how I want to use real estate to gain passive income and eventually financial freedom.

Thats what I thought, just wondered if something had changed that would make Overages easier and possibly a fruitful side income. 

Eventually the distributions will exhaust the cash, then it gets even more complicated, especially if I'm unable to put rental income back into the IRA. 

Will the passive income we start receiving (once our vacant side is filled) help with getting our new home loan?

If we buy a 120k home, I calculated that our monthly mortgage will  be about $870, assuming a 4.605% interest rate.The only problem will be getting approved for the loan since we are both unemployed without a steady source of income.

@David Boley you will still need to file state taxes for any income you earned in the second state though -- depending on the state.