I think there is an injunction in place right now preventing automatic liens.

What I like about it is, if the stock market is going to have major correction sometime in the near future, this strategy *should* really limit your downside and prevent you losing a ton of money. 

I like your analogy.For those concerned about tenants doing this... stick a clause in your lease preventing tenant from profiting on a sublease and requiring any excess to be paid to the LL. 

@Christine Kankowski - we replace all air filters quarterly which allows us to check up on each unit and also helps prevent some costly HVAC calls.We typically tell tenants that we're coming by to replace air filters and a quick walk through between Xam and Ypm on whatever day and ask if they have any time constraints that we can accommodate. 

And how can I prevent it besides avoiding investing completely?

These three things will answer all of the questions, solve all of your problems, and point you in the right direction...and will prevent you from accepting failure before you start.The three things are:1 - How to analyze markets...not properties, markets. 

We assist from locating valuable areas and properties, curating the design based on your budget, contracting local vendors to maintain the property with preventative maintenance as well as upgrades to keep the property moving forward on amenities and features from a STR perspective as well as adding value to the property.

Yes he does make good money and has an entrepreneurial spirit that should be commended but someone on this forum needs to teach the value of capital improvements and preventative maintenance.

I am quite familiar with the IRS rule on prohibited transactions, and there's no rule that prevents co-investing with a disqualified party. 

He is in another house now with his family and does not have the $$$ nor the desire to handle both houses.Are there any creative ways to work a deal that would prevent him from a short sale and at the same time get a deal on the property?