Under this rule, if your average stay is seven days or less and you materially participate in managing the property, you can treat it as non-passive income and potentially use tax losses (like depreciation) to offset other income.

Is there even any benefit to that if all the activity is line 2 rental re income/loss on the K-1?

I've come to realize that opting for a Delaware LLC might be unnecessary at this stage; it seems more fitting for the future when my portfolio experiences significant growth.

@Adolphus Fletcher For multifamily investing, most real estate investors typically use an LLC for several reasons:Liability Protection: LLCs protect your personal assets from lawsuits or debts associated with the property.Pass-Through Taxation: Income and losses from an LLC pass through to your personal tax return, avoiding double taxation seen in C-Corps.Flexibility: LLCs allow for flexible management structures and are easier to maintain than corporations.Anonymity: In some states, LLCs can offer a degree of anonymity if you use a registered agent and form the LLC in a state that doesn’t require public disclosure of members, such as Delaware or Wyoming.S-Corps are should be avoided for real estate investing because of various reasons.

Either way I've loss close to $50k already in holding cost, fees, and withdrawal from HELOC for downpayment.The problem is I could list for $50k lower and still not get offers in its current condition.

Since you're not working, you may qualify for REPS, but you need to meet the750-hour requirement and materially participate in your properties.The $300k withdrawal will be taxed as ordinary income, so using cost segregation to create depreciation losses could help reduce your taxable income.

Reminds me of the scene from the big short with the stripper who has five properties and swimming in debt.The other factor is how much do you have in reserves, do they cash flow and could you afford a job loss?

We're finally seeing some of the incomplete developments being back-filled, yet dilapidated suburbs and subdivisions are found in areas where economic development slowed and later stopped leaving job loss and abandoned homes in its wake.

Putting that money in bonds would even be better than paying down those notes (even without the loss of mortgage interest tax deduction savings factored in). 

Your losses even depend on number of things like the basis of your earlier property, any additional capex required like HVAC or major repairs, output of cost segregation studies, etc.