There are several different types of income in the US tax code.Two main types are “active income” and “passive income".Active income is money you earn from working, such as wages from a W-2 job or income from running a business.Passive income is money you earn from investments like real estate, stocks, or rental income from your RE portfolio where you earn $ without actively working.Normally, you can't use passive losses (like losses from real estate investments) to offset active income like your salary from a W-2 job.That is unless you are an RE Pro.The reality is, that Real Estate Pro status is just a filing status similar to filing married or jointly.And if you are a real estate professional you CAN use passive real estate losses to offset active income from other sources.To qualify as an RE Pro you must:1.

You will earn more in the end.If you want me to assist with setting up something similar to what I have, feel free to reach out :) 

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.

@William Johnny If you want to get into real estate, you mostlikely need to be earning $100k plus, yoi should get your real estate license and start aprenticing under a seasoned investor.

In fact, he had never seen it happen personally in his entire career.

The STR guest doesn't expect to earn anything beyond their regular pay during their vacation.

Active = Income earned from Material Participation.Whether that's SMB, W-2, contract income, or prof real estate.This is income where ordinary tax is paid and losses offset other income.

@Piper WatsonPay down the credit cards as the chances of earning a return that is at a greater interest than the credit cards is very rare and risky.

After 3.5 years of being interested in real estate, learning, and making it my career, I am officially an "investor".

I'm glad the community was able to help you make a stronger lease to avoid issues later in your investing career and that everything worked out for this situation.