Without REPS, those losses are usually trapped as passive.You invest in a Short-Term Rental (STR) and materially participate, making it non-passive even without REPS.Multifamily (2–4 units): Great for long-term cash flow and equity but offers limited W-2 tax relief unless REPS applies.Short-Term Rentals: Strongest W-2 offset opportunity if managed actively, though more operationally intensive.Commercial Real Estate: Larger depreciation and cost segregation benefits but still generally passive without REPS.Cost Segregation Studies: Can create large paper losses upfront, but those benefits are often suspended unless REPS or STR status unlocks them.A small multifamily is a great wealth-building vehicle and may help you shelter some rental income from taxes, but it won’t do much to reduce your W-2 burden unless you or your spouse can meet REPS requirements.

I would recommend starting by meeting a local lender or small community bank for a cash-out refi or HELOC on the $260k property to unlock equity for the next purchase.

Then once you burn through your deposit you start taking draws but you wanna get so deep into your project with your deposit that it will unlock most of the budget which will allow you to finish.Problem is, whether it is a fix n flip or ground up, ppl try to piece mail it together. 

Should clarify, suspended passive losses that exist at disposition of the activity do get unsuspended/unlocked... but that's not a tax benefit.

That’s usually where I see developers either unlock extra protection or unknowingly leave gaps.

If you're serious about connecting with people in your area and finding mentors, the Pro membership unlocks a lot of features that make it easier, like the ability to send direct messages to anyone on the site and access to the full member directory.

Setting up the right entity (LLC with possible S-Corp election) can help reduce self-employment tax exposure.Long-term rentals reintroduce passive activity rules, but combining them with STRs or qualifying as a real estate professional in the future can unlock additional tax strategies.Regardless of the path, detailed recordkeeping of travel, supplies, contractor payments, and property expenses will be critical to maximize deductions and defend them in an audit.Starting with STRs is a strong move because the tax code gives you more flexibility to use losses and deductions against your active contractor income while you build equity.

That wiped out years of rent, but also unlocked the property’s full value in a prime location.

So even if it’s just for a year or two, using the buildings as temporary storage or workspace could unlock meaningful deductions.There are a few caveats, like making sure the use is legitimate, tracking any related-party transactions properly, and planning for potential depreciation recapture if the property is later sold.

That’s why many people refer to it as a “loophole.”With long-term rentals, you normally need REPS to unlock that benefit, and even then there are income limits that can phase out losses.