I had the funds in savings, but this year and most of next year will be a loss until I recoup these expenses.  

Just to set the record straight, because Praxis Capital was mentioned…I have been investing in real estate since 1989, and Multifamily since 2002, with zero investor losses.  

I would avoid, suffered huge losses due to 6+ month vacancies between tenants and very expensive turn repairs (~4k after only 1 year).I will update this post if my experience changes for the better 

If you're negative can flowing property is going to appreciate, then it may make sense to hold on.A loss is still a loss, and I would not hold onto a deal because I'm getting a write-off.

If I decide to sell a rental property, my understanding is that my accrued passive income or loss on the rental becomes active income or loss. 

Since you file jointly, if she meets the material participation test, you can offset your W2 income with STR losses.

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.This example shows that while the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall annual loss.

While it’s frustrating that the tenant is still there and not paying, turning off utilities could complicate the situation and potentially lead to legal consequences for your "friend".In the meantime, document everything (the tenant’s non-payment, the lease terms regarding utilities, and their attempts to resolve the issue) to present in court, which may help recover the outstanding balance later.

It has gotten harder as housing values have fully recovered from the 2008-2010 real estate crash.

Transferring your current property to an LLC typically won’t result in a tax gain or loss but could trigger transfer taxes depending on your state.