Distributing the property out of the S Corp will be a deemed sale and taxable event. 

I always remind folks that comparing the IRA to your taxable self is not generally applicable. 

It will give you some cushion if in case you need to evict them.Have to check your state law - no more than one month security deposit allowed and the second one is charged, it has to be kept in very specific escrow with different terms (interest rate etc) than the first one.You could charge first and last month Rent but it would be your taxable income at the moment of collection, even if it's the income of next year.Security deposit belongs to Tenants so it's not your income. 

There would be no taxable gain in this situation and I am still able to claim my deferred losses.

@Joseph PuglieseIf your business is accrual basis and previously accrued the revenue and included it in taxable income, yes you could write off the bad debts.If cash basis, you don't get to write off revenue you never received as you never were taxed on it in the first place.There are extremely limited exceptions to this, particularly if you're cash basis and recognized the revenue under constructive receipt, however I suspect your fact pattern is not that complicated.You can deduct your normal operating expenses of the rental.Your CPA is best equipped to help you deal with this.

A big part of the advantage of a Roth IRA as I understand it, is that anything earnings on investments are not taxable. 

Due to depreciation, we report negative taxable income from our real estate investments, which helps offset my W2 income.  

Being that it does not require an LLC for you to get direct control of the funds, there's no need to incur initial LLC formation and ongoing LLC maintenance fees.Furthermore, you'd be able to invest in real estate with leverage without generating taxable UDFI. 

I will have proof of income in 2019 due to a large amount of taxable income this year.

I can chose to pay the taxes on all my income and then invest personally with my taxable accounts.