" I'll end up owing more because the rental income exceeds the deductions I can make"
OK, lets try again.
Let's start with $1000 a month in taxes and interest. If you take that off your schedule C, your personal income tax rises by $3000/year.
So now, let's rent it for $2000 per month. Your deductible expenses might be $1200 per month (the same taxes and interest, plus hazard insurance and depreciation and any utilities you pay.) You pocket $800 per month, or $9600 per year. Your income tax on the $9600 is $2400.
When you account for the $2400 in new tax, plus the $3000 in lost schedule A deduction, you are still $4200 ahead. This is a problem?
"the land is worth far more than the property itself"
That makes no sense. If the fair market value of the condo is, let's say, $200,000, that includes the land or any land rights or shares of the common land that go with the condo. The land can't be worth more than $200,000 per shareholder if the overall sales price is only $200,000 (unless something very strange is going on, like the condo is full of asbestos making it more expensive to demo than it's worth.)
