.: Quote from @Tim Delaney: That seems odd to me assuming you aren’t in a highly negative cash flow situation.

@Otis Clayton To partner in real estate effectively, establish a clear structure like an LLC for liability protection or a Joint Venture for single projects.

This effectively guarantees they will buy the loan at closing.

I've hated many of my tenants in my career.Given your negative feelings on the tenant I think you will feel better looking at this another way.

You should also be well versed in the local vacancy rates and how they effect your unit and turnover times. 

I would not go into an investment knowing it would have negative cashflow. 

Also, your total returns go down without any leverage because you lose the multiplier effect of appreciation.Now, to answer your question.

Net effect, typically, means distributions are not taxed in current year, but do lower your basis resulting in larger tax bill upon sale.Depreciation reflected in the net gain/loss from rental box on K-1.  

What makes it slow in this case is that you don't really start seeing real cash flow until after year five but it's more effective than rentals in that there is little to no maintenance.Sure you can live in a home while fixing it up with the intention of selling it for a nice profit later but I think many people are already doing that and the buyers of slow flips now also have that opportunity without having to qualify with a bank.

But same theory give them a second chance and many times I was negative cash flow I would rent for less than their mortgage to get them going again.. did well over hundred of those and I can count on one hand how many actually were able to totally cure and buy the home back.. 90% of them defaulted in the first 18 months..