You won’t end up in tax court but if you do, you would win based on everything you cited about material participation as long as you have a time and activity log that shows your tasks and provide a guest list that shows the number of nights your guests stay (easily found on the various platforms). 

THe house you describe is one where it could easily happen. 

IF you're going to continue to rent out rooms, you want to be able to get rid of troublemakers quickly and easily...

If you don't want people to quite so easily know your address get a PO Box to use for business correspondence.

You can easily do this on a spreadsheet, and it will take less time to track than finding and learning new software.

If you come to meetings and network you can easily find it if you have a deal that the numbers work.

Then you could find yourself in a position where tenants are extremely pissed off, small problems turn into big ones, and you've created a huge mess that could've been easily avoided. 

There are plenty of dated condos in my town that cost between $275-350K which could easily use $100K worth of renovation.

This becomes especially critical in the current environment where you can earn 5% on your money easily and aren't tying up cash until the project is completed.2.

The average person can totally achieve financial independence easily with education, self-discipline, and consistency.