Active participation isn’t the same as material participation (defined later).

One quick note as you think through material participation:7 material participation rules (just need to meet one), with the first criteria being that you participated in the activity (i.e., STR) for more than 500 hours in the current year.

Overseeing tradesmen while they work on your properties sounds like material participation to me.

You can break it out by general RE activities and material participation.

It helps with material participation but is permanent.

This means the average stay at your property cannot be more than 7 days, you will need to pass the tests of Material Participation or being a Real Estate Professional, and keep a log of the hours you spend performing “activities” for the real estate.In order to Material Participate, you need to pass one of the seven tests for Material Participation on the property.

.✅ Bottom line: This deal works if:You can keep days-on-market short (≤60 days), orYou can confidently list/sell at the high end ($495k–$510k+).If it sits too long and sells toward the low end ($470s), you risk burning cash or barely breaking even. you are correct, you are taking on someones problem to make it your own.

In those cases, the real question isn’t about passive vs. nonpassive income—it’s about whether you (or your spouse) are materially participating in the business.The IRS rules define “significant personal services” as services provided directly by people (not things like utilities or property itself).

You would need 750 hours and more than half your time (this could be you and your spouse).additionally, you would need to materially participate in your rentals.

Where STRs differ (and why people talk about them more)Short-term rentals sometimes qualify as an “active business” (if the average stay is under 7 days or you materially participate).