This is a strong audit topic for the IRS.If you are having a management company handle the property, you are not going to be materially participating.From the IRS audit manual: A trade or businesses is a passive activity if the taxpayer does not materially participate.

I did an internal audit on this discount one year to track if the savings were worth the effort, we had a median savings of 43%, so yes, it was very worth it.

Asking for a full audit for raises over $500k will make it unworkable for real estate crowdfunding most likely unless there are accountants willing to sign up for a lot of risk for very little money.  

You would have to be able to demonstrate your intent should you get audited.

Check out the audit section.

There are some very good schools there.While I'm guessing these are audited courses without credit hours, students receive a certificate of completion.Too bad, I searched RE and nothing popped up.

It is our job to keep the documentation to in case IRS audits you. 

Hi,Helping my father here.....He was a Hard Money Lender (private lender) and is now being audited by the IRS. 

His clients haven't been audited for the past 12 years based on this strategy, so I'm guessing it works.  

The barrier is the additional complexity - now you are operating two sets of books, and filing two tax returns, and have more operating agreements, more state registrations, etc, need to manage cash better, need to keep in constant mind that your rents need to be a supportable FMV, which may require getting third party certification on your rents so that in the event of an IRS audit, what you have done is supported.In short...the size of the project, and the taxable income, need to be of enough scope to make all the additional costs and annoyances worth it.