Since you’ve been house hacking, you probably already know about depreciation on the rental portion, allocating expenses, and potentially qualifying for the home sale exclusion if you live there long enough.With your new STR properties, keep the STR loophole in mind: if you materially participate (make sure you start tracking your hours now) and average stays are under 7 days, your STR losses could offset active W-2 income, which can be huge while you’re still in the military.

What next, a dog food? 

I sure don't want to take on someone else's loss. 

Clear Exit and Downside LanguageYour operating agreement should outline:How losses are allocatedWhat happens in a forced saleHow a refinance is handledBuyout options if one partner wants outGetting those pieces clear now protects both of you if the market shifts.This type of partnership is really about matching risk with reward.

Check out this chart: FICO Score Pct of Population Default Probability 800 or more 13.00% 1.00% 750-799 27.00% 1.00% 700-749 18.00% 4.40% 650-699 15.00% 8.90% 600-649 12.00% 15.80% 550-599 8.00% 22.50% 500-549 5.00% 28.40% Less than 499 2.00% 41.00% Source: Fair Isaac CompanyMake sure you understand the Class of properties you are looking at and the corresponding results to expect.Horror Stories from those that did NOT Understand What they were Buying:https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-painhttps://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-losshttps://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costshttps://www.biggerpockets.com/forums/963/topics/1195280-experience-of-oos-investing-in-cleveland-after-15-years

if you have a str, the first conversation should be with an accountant to see if you can treat the property as active instead of passive.If it is active, you will be allowed to offset the rental losses with your income such as wages, interest, dividends, etc.Best of luck!

The only time you see it from lenders is when they can cross collateralize against the other assets and the borrower has significant net worth to cover the losses.  

@Ryan Montbleau this is what we do:A bad tenant can lead to thousands of dollars of losses via unpaid rents, legal fees and property damages.

Meaning, in order to offset w2 income with STR paper losses, you must fulfill material participation criteria in your STR(s), the least of which would be 100 hours and no less than anyone else.

BTW the $200k taxable income was largely offset by deductible losses. 3.