But because I live in lovely California, I am feeling extra stressed out about even being able to move forward with the FTB $800 per LLC threat over my head since it’s so broad any semblance of managing anything at all is ripe for audit even with RA.

Make sure to consult with your CPA about which hours can be used before starting your hours log.Here are the indicators that put you at risk of an Audit that the IRS looks at with this strategy::(Source)Real Estate ProfessionalIf you don’t have the ability to invest these kinds of hours into a property, you can become a Real Estate Professional under the tax code, or have a wife or husband become a Real Estate Professional, which then will turn your Passive Losses into Active Losses on your real estate.To become a Real Estate Professional, you need to have:(Source)As long as you work 750 hours in real estate (14.42 hours a week excluding vacation), AND half your time is spent on real estate activities (so you could still do other work for 12-13 hours a week), you can qualify as a Real Estate Professional.

Before I invested in them, I vetted the accounting firm that does their audits as well as their lead bank and got great references.  it’s a great balance to my short term rentals, farms and equity accounts For my own curiosity, what's the REIT?

Three, they function more like the accounting systems I'm used to from my corporate days--you can't delete things as easily, so there's a clearer audit trail.

It doesn’t have to be fancy; just consistent and clear enough to show your participation, especially if an audit comes up.Personally, I try to break things down by week, and add a summary of what I focused on (so if you have a template or method that makes this even easier, definitely share ideas!).

@Alana Reynolds I would say take advantage of STR tax benefit as it is already October and then convert to LTR fresh next year and document your narrative why you changed for audit defense.This post does not create a CPA-client relationship.

Passive loss strategies such as REPS and the STR loophole are known audit triggers so your friend would want to do this the right way. 

Some people will simply transfer the property anyway and then simply make sure they do not make late payments or otherwise default on the loan because most lenders won't spend the time and resources to audit the account and discover the change as long as borrowers are making on-time payments every month. 

I understand your aversion to paying a tax professional, but you would be better off.Your attempt to DIY this thing may result in losing some of the benefits and even triggering an IRS audit.

Or what happened if the other party is audited and they report it differently than you did?