The thought is, if the structure is rebuilt, you would be in the same (or most likely better shape) than pre-loss.  

Another term for that is that risk of loss must have passed from you to them. 

I want a simple place to track my P&L's and tax implications like accumulated depreciation and tax deferred tax losses. 

@Ryan Thomson Sorry to hear about your loss.

For risker applicants, require a guarantor (who is not "judgment proof") to agree to pay for damages and unpaid rent.Unfortunately, you cannot eliminate all risks of loss, so there are times that a tenant may end up causing damage beyond the security or coverage you have to pay for damage, but the above items will help.

But if the loss was caused because of their poor workmanship do you want to have them redo it. 2.

The goal is to not eat losses every month for the next 5 years while I wait for rent and price appreciation.

Alot of first time cost seg folks come to us with losses generated all excited to offset w2 income, only to find out they did not qualify for the STR loophole properly and cannot use the losses against active income.

Should I proceed with the deal or just chalk it up as a loss?

Do you file jointly with someone who has income that needs to be sheltered with RE losses?