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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The CRE lending market is expected to recover gradually, with opportunities emerging as interest rates stabilize and maturing loans drive new borrowing activity.Some regional banks are certainly struggling while others are consolidating in bid to become national powerhouses.Revised CRE Lending Projections2024: 26% growth to $539 billion (down from previous 34% growth forecast)2025: 23% growth to $665 billion (slightly lowered from 24%)Multifamily Sector Adjustments2023: $246 billion (49% drop from 2022)2024: 21% growth to $297 billion2025: 31% growth to $390 billionMarket FactorsRecent moderation in interest ratesSignificant number of loans maturing soonProperty owners hesitant, hoping for further rate decreasesUncertainty persists in the market, particularly regarding interest rates and property owner behavior.

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.  

When your rental produces a loss in excess of income (AGI) you have a passive loss.

Also, do the aggregate losses above any W2 income get carried over to the following year?

If your income is below the $150,000 AGI limit you will be able to use up to $25,000 of the passive losses (if any) to reduce your income and therefore tax. 

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