If your partner qualifies for REPS and materially participates (and you elect to aggregate rentals if needed), rental losses can be non-passive and offset your W-2—subject to basis/at-risk limits. 

I focus on spreading smaller amounts of capital across multiple deals to diversify risk while still participating in larger opportunities.

You can time renovations, leverage cost segregation, and even qualify for active participation if you manage more closely.Turnkeys are fine for simplicity, but they’re not always the best from a tax efficiency standpoint unless you have other active real estate to offset the income.

Great points, Jeff — and you’re right to highlight that the expense ratios are unusually efficient for a coastal STR.A couple of clarifications on the numbers:The current owner self-manages, which keeps cleaning and maintenance costs lower than a third-party STR manager would typically charge.Some of the repairs and CapEx were front-loaded in prior years (new flooring, appliances, and paint), so last year’s P&L reflects more of a stabilized-operations scenario.The utilities figure is accurate — it’s higher due to being master-metered for the property — but the other OPEX categories are slightly understated if you were to underwrite this as a fully managed, third-party operation.If I modeled it using a professional management assumption plus normalized reserves, the operating ratio trends closer to 48–50%, which aligns with what you mentioned for coastal STR multifamily.I appreciate you calling that out — it’s a great reminder of how much variance there can be between owner-operated and institutional-style expense reporting, especially in hybrid STR assets like this.Here's the owner's profit and loss statement for the exacts of the 2024 year.

The key is proving you materially participate, meaning you’re actually managing it day to day.

Lot of pitfalls on material participation, which is what I believe you mean by "actively manage" in this post. 

We got hit with a lot of fraud 1-2 years back and instituted ID check.

@Wayne Wollesen Great tips in this forum regarding understanding the context in which Cost Seg is done and how it may or may not impact the bottom line on your tax return depending on material participation, real estate professional tax status, classification as short-term rental, substantial services, etc.

This will let more knowledgeable Americans, even if they aren’t wealthy, participate in private market investments such as pre-IPO, venture capital, hedge funds, or private real estate. that will be a cluster F  in a big way unleash those that cant afford to lose money on the most risky investments and the slickest talking promotors what could possibly go wrong

I recently began my journey as a Mortgage Loan Officer with loanDepot, where I help clients find the right financing solutions for home purchases, refinances, and investment properties.Before transitioning into mortgage lending, I spent years in institutional finance and trading, where I developed a strong foundation in markets, risk management, and client service.