Depreciation typically results in a tax loss.

If you operate the vacation rental as a short term rental, you will be able to take advantage of taking any losses you have on the property against your ordinary income.

Section 469(c)(7) provides an exception that allows qualifying taxpayers to treat rental real estate activities as nonpassive, enabling them to deduct losses against other types of income.

I have seen instances where a 1031 exchange was not required such as1) The overall gain from the sale of the investment property was very small or even negative2) The taxpayer had enough passive loss carryforwards to offset the gain.A 1031 exchange is a very powerful tool put it has to make sense before going forward.

I see a lot of posts on Bigger Pockets asking if I should refinance because my closing costs are XYZ.

Then you can start expanding into bigger, better things.

That, combined with hidden repairs combined with self-managing a low income could all construe to thousands in losses. 

Welcome to the bigger pockets community Elimar!

These self employed 2nd mtg's are typically based on alternative method of caluclation like profit and loss statements if you're self employed or the last 12 months of bank statement deposits using a formula to derive an income from these deposits (like 50% of all annual rolling 12 calendar month deposits X 50% /12 months = monthly income).

For residential mortgage, an LLC needs two years of its own tax returns or occasionally, a local credit union where you have an account will ok it.The bigger question is about your partnership.