It's still not a total loss though, I'm still going to get most of my expenses paid on it, just not all of them now. 

I found someone on the internet who told me about the avocado farm and he gave me the bad news that there are tons of lawsuits against the company and to count it as a total loss.

Rather than take a complete loss on the uncollectable debt, can I take the assigned debt, make collection efforts and upon failure to collect declare the loss to offset the capital gains?

As the Company is working to cure title in a reasonablydiligent manner, the Company would not be liable for any loss to the Claimant.

I want to know if it is possible to use this home loan for STR’s since I know STR’s (Under Tax Code Section 469) is one of the routes any RE investor can take to reach “Real Estate Professional Status,” and so use passive losses from my property to offset active, earned income (My W-2 Job in the future). 

As far as the reporting goes, the rental income and losses will most likely be reported on your Schedule E - speak with a tax professional who has expertise in real estate.

You can also take a loss on the old asset. 

If it was me, and I found another opportunity, I would cut my losses, especially if you can't fix the physical issues.

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When analyzing deals its always seems as if the opportunity is passing me by and the rational part of my brain turns off but posts like yours are sobering and will help prevent mitigate losses.