It is now treated as a former passive activity and those prior losses can only offset income from that same activity going forward. 

This could reduce your taxable income in those years.Your decision depends on your long-term strategy.

Warning: this exception applies to corporations only.

You would just be using the property's income to qualify.

The income requirement was $6000.

They are not experienced real estate investors, they are retired and looking to create additional income. 

50k to 60k gross rental income?

Do they have other sources of income for retirement?

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.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall loss.

How are you determining income, avoiding fake paystubs & employment?