I paid the partner out-does he pay captial gains tax on the earnings? 

I doubt if it has appreciated significantly to the point where you would have a taxable gain.

So they’re treated the same as traditional long-term rentals for tax purposes.That means: yes, you can do a cost seg and claim bonus depreciation, but it’ll generally only offset passive income (your rental profits), unless you’re a real estate professional for tax purposes.4.

If you qualify to take those passive losses against your income and are in the 37% bracket your tax savings would be 75k x0.37=28.75k. 

You could even drop title so that each individual member holds title to the real estate and then can decide individually whether they want to 1031 Exchange or pay capital gains. 

I have sold a few properties - they are typically home owners and I haven’t ran into issues not realizing the gains. 

I could also potentially pull $100K instead and try to still do a owner occ loan and get a $5,361 monthly.I'm unsure of my goals now as it really was to achieve financial freedom with semi-active/passive income build-up but the thought of being able to leverage the cash is very intriguing to me.

"Since the REP status allows the K-1 losses to be treated as non-passive..."

There are certainly a lot of benefits that the OBBA brings to MA residents who are looking to acquire a STR.The first conversation you want to have with your accountant is what you need to do to treat the property as active instead of passive(if that is what you are looking to achieve).The other benefit of the OBBA is the increased ability to write off state and local taxes as part of the itemized deduction.Best of luck to you in your search!

My belief is “passive” (meaning no value add, flip, etc - residential RE is never truely passive) real estate investing is challenging everywhere.Historically San Diego has been an outstanding location to invest in real estate.