Real estate professional - rentals & flipping
I've been reading old posts about the "real estate professional" status (of which there are many) but it isn't clear to me if flippers can utilize losses from their rental properties if they don't self-manage their properties (which would help them accrue "material participation" in the rentals).
I currently work a W-2 job and have 17 rental units which generate a decent amount of paper losses each year via depreciation. I am considering moving into either home or land flipping full-time after I hit 40 units of rental property. I'd like to have my rentals help offset the huge tax liability that flipping generates.
The Scenario:
Let's say that I work 2,500 hours per year flipping land and therefore qualify as a RE Professional and make $150k/yr from flipping. I have 100 rental units which generate $100k/year in losses thanks to depreciation. All of the units are out of state and as a result are managed by third party managers, but I have >10% stake and any purchase decisions >$500 are run through me so I have met "active participation" but not "material participation" in the rental business as I spend less than 500 hours on the activity.
Can I "group" my flipping & rental activities such that I have now "materially participated" in the combined activity, allowing me to utilize the $100k in losses to turn my $150k self-employment income into $50k?
For the record I will certainly hire a CPA when I get near this situation, but for now I'm just trying to wrap my head around my options 2-3 years out. If I can shield a large portion of my income then it would make help make the argument to quit my W-2 job sooner and move into full-time real estate work. Thanks in advance for any replies!