What out of state areas have you considered?

Consider starting small by house hacking a single-family home, renting out rooms, or adding an ADU if possible.

Hey @Justin Brown, what @John Underwood said is spot on.SLC has been restricting STRs for a long while now and it isn't going to get better.People who have STRs in areas where they are not allowed are breaking the law and will eventually pay the price.Having said that, you should check and see if there are certain areas where it is allowed in some way and that is why they exist there.

If you can find one its Millions of dollars since those types of spaces ar3e close to beaches here. 

If a tenant causes a claim, why should the landlord's insurance pay - possibly resulting in an increase in premium or even a cancellation of the policy?

The worst thing is to pay for a service where you don't get a benefit.If you have STR's and actively manage them, then there is a good chance that you can treat the propreties as active instead of passive which will allow you to offset the losses with other forms of income such as wages, interest, dividends, gains, etc.

Even if the rental has a decent cash flow with additional flood insurance, we're still not sure we want to take on that risk as we are out-of-state investors (planning to move back to KY in the future, but not now) and we don't like that it will potentially bring down the perceived value when we try to sell it in the future.The seller has never lived there and has not provided any information on if it has flooded before or not. 

Each former member is then free to either do a 1031 on their % interest or take the cash and pay the tax.The opposite manuever was more common until around 15 years ago. 

There is no possible way, you can rationally estimate (guess), which one out of how ever many others may say it takes, you hit on. 

Say that it is part of a 5/2.