Rising land prices are not that common either, and limited to select areas.  

However, the tax treatment differs between short-term and long-term rentals:Short-Term Rentals (STRs): If you materially participate (work 100+ hours and more than anyone else on the property), you may be able to offset rental deductions against W-2 or other active income, offering greater tax benefits.Long-Term Rentals (LTRs): If your AGI exceeds $100K, your rental losses may be limited, unless you qualify as a Real Estate Professional (REPS).If you plan to expand your rental portfolio, consider an LLC later for liability protection and easier management.

Personal usage will limit the loss in 2023, as mentioned in the reply.

I don't understand if I count since I'm living in the property or if it's only the tenants that count towards the limit of individuals that are unrelated living together.

Additionally, his credit is not the best, and he has limited funds for a down payment.Any potential options or solutions that may be available?

You can say the best out of the limited number of lenders they have signed up under their company but not in general to the vast majority or finance options under all banks and lenders.

The effort to foreclose, the limits on rates, etc.Maybe a unicorn to find HML that will loan him the necessary money, but I doubt he will find it.  

Like you said, I want to seed different strategies I can implement with the limited capital I have.  

There are a very limited and reliable few of lenders that do true DSCR 2nds.

To me at my current knowledge level, this deal only works if taking over the loan - to limit the out of pocket money to acquire the property since the outside reno and new septic would take up the bulk of rehab costs.