If you meet this first test, you are a REP...now determine if you can use the benefits of it.2) if you or your spouse meet test 1, THEN you can make an election to combine all your RENTAL activities together for purposes of determining if materially participate in your rental activities.  3) So you met test 1, made the election under #2 - now you see if you materially participate in your rental activities. 

My goal was to be a little active to make a higher return and to do that I needed to be in the same neighborhood where I live.

Get your license, do the prospecting activities, and find the buyers.

If your income exceeds $150,000, your ability to deduct passive losses from rental properties is limited, and any disallowed losses carry forward to future years under the passive activity loss rules.Yes, the deductions can accumulate and roll over year after year.

Are you actively trying to seek properties in that area?

Where are all the comments from people who are active in the BP community? 

However, I'm excited to be a more ACTIVE member moving forward! 

Rarely do I come across a LLC that is treated correctly (without comingling of funds, documenting the minutes of the required board meetings, and often paying the franchise taxes to keep the LLC active). 

Hey @Austin Wolff - You bring up some good points about knowing the house better than anyone when you build new if you are actively involved and onsite regularly, but I'd get behind @Jay Hinrichs, in the sense that the numbers don't always allow you to build new.Here in Chicago, new developments are super pricey, and even the BEST DEVELOPERS HAVE SLIM MARGINS. 

However, managing a rental property or being a landlord is not a passive activity.