Yes, the hours you spent setting up the property before it was officially rented can count toward material participation.

Do you have any recommendations on courses, books, or materials to learn from? 

I'm uncertain about material participation in the rentals. 

We are inheriting a property with existing leases and existing tenants so we are jumping right in. Besides reading everyone's experiences on the forum, what practical books do you recommend for beginners in setting up...

We both materially participate in our rentals (>500h between both of us).

To qualify, taxpayers must meet specific criteria demonstrating that they are real estate professionals who materially participate in their rental activities.How to Navigate the Rules:Step 1: Identify your real property trades or businessesHere is a list of activities that are considered to be a real property trade or business:RedevelopmentLeasingConversionConstructionReal property developmentReconstructionOperationRentalBrokerageManagementAcquisitionIf you participate in multiple of these activities, you may be able to combine them making it easier to meet the material participation hour requirements.Step 2: Demonstrate material participation in real property trades or businessesThere are seven tests to determine if you demonstrate material participation.

That said, if you don’t materially participate, the losses stay passive and won’t offset W-2 income.

Meeting material participation rules is also huge, dont miss out on QIP tax savings for STRs, and a good CPA can guide you through all of that.Planning improvements or new furnishings strategically can impact which tax year you claim deductions in and help you reinvest more effectively.On another note, Tennessee is a great state for STR investing.

Would that not fall under the same category of “material participation” in day-to-day operations?

Some people set up an LLC after closing for liability and ownership clarity, though that depends on lender approval.On taxes, both of you could qualify as materially participating if you put in the hours and track them.