If you do, you should expect a very aggressive challenge by the IRS.At $350K of combined value it might be worth the cost to get a segregation study if you intend to keep these a long time.

What are your biggest challenges when designing your vacation rental?

I merely made mention of some of the challenges I faced, but those challenges cannot be overstated either.

As time went on, prices came down because buyers saw the challenges with rebuilding--trade labor, insurability, not knowing what will be built on adjacent lots (like one lot where the owner built a house that looked like a concrete mushroom and that devalued the adjacent new construction homes built to more conforming architecture), and so on.The weakness with moratoriums such as these is that it is now illegal to offer less than FMV as of 1/6/25--but what was FMV on 1/6/25? 

You technically CAN break it up on Schedule E; however, it is not the best thing to do for audit purposes or an actual breakdown.You should have an operating/partnership agreement together and you should have a dedicated bank account for the property.  

Whether these factors outweigh the challenges is a personal decision. 

Many Texas cities are incentivizing developers to build affordable housing units, but challenges remain around keeping these homes accessible long-term.

@Sol RomandRentals without windows can be challenging.

Challenges?

Challenges?