Please be aware that you are not absolutely free to decide how to treat your activity. If for instance, you would sell three properties during the year and make substantial gain that overpass all your other income - the IRS would treat your activity as a business regardless your past history.
You likely misunderstood the IRS agent. Real estate taxes are deducted as taxes on the schedule A and not as investment expenses.
If you treat the property as a second home (personal property) - you may deduct the mortgage the same way as a mortgage, but for investment property - that would be investment interest. Please consider this definition of the investment property - Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). - While it sounds a little broad and allows multiple interpretations - we need to relay on it.
Investment interest is not limited by the mortgage, the advantage of investment interest treatment is that you may also include - for instance - a credit card interest that you incurred when purchased some materials for the investment property. Etc.
Generally - and that is correct - your deduction for investment interest expense is limited to the amount of your net investment income.
You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. The interest carried over is treated as investment interest paid or accrued in that next year.
However - in the year you dispose of the obligation, or if you choose, in another year in which you have net interest income from the obligation, you can deduct the amount of any interest expense you were not allowed to deduct for an earlier year because of the limit. Thus - you may deduct the interest expenses in the year you sell the property.
Your investment expenses (other than interest expenses) must be ordinary and necessary expenses paid or incurred:
-- To produce or collect income, or
-- To manage property held for producing income.
The expenses must be directly related to the income or income-producing property, and the income must be taxable to you.
Expenses you had in connection to your activity do not meet the definition above - they are related to a specific property, and not to investment activity in general (to produce or collect income); and that is not income a producing property. So generally speaking - these are not deductible investment expenses. Moreover, expenses are related to a specific property - so such expenses are not deductible and should be added to the basis.
As you are in the gray area - and some items may have multiple interpretations - please provide all the information above to your tax preparer.