This is more of a tax planning matter, so it would involve working through several specific questions to tailor it to your situation.

.- to do a successful brrrr involves a lot of skills.  

You materially participate in an activity if you're involved in the operation of the activity on a regular, continuous, and substantial basis.

What is the risk involved?

@Heather Luu  the first thing that comes to mind is if that check was from the insurance company or insurance company funds, it might be time to get them involved.

I’m really excited to get involved in the community and learn about different markets across the country.As a first-time homebuyer and investor, I’m curious about which markets might be good for starting out.

You could also qualify if you spend more time on the property than anyone else involved, regardless of hitting 100 hours.Ex. managing contractors, handling bookings, setting up the property, or dealing with guest communications, you might meet the material participation requirement without needing to track 100 hours.The key is to document everything.

The Governmemt then “sold” individual apartments to their occupants or other interested parties for $500.

Property management involves overseeing and maintaining rental properties on behalf of the property owner.

This all comes down to how you're structured, how the flip cost were accounted for, if there is a partner (you mentioned "we").If it is an S Corporation and you "distribute" or "sell" the property to yourself, if there is any loss on value, which probably there isn't, know it most likely won't be deductible if it's a related party transaction.