If you have a solid tenant lined up, like say Bigger Pockets HQ (yes, I put 2 and 2 together there, I'm sure you have too :), or some other business you  or someone you know personally runs, I think it's a no-brainer.

Quote from @Garrett Brown: Hey Kyle, you are taking the proper steps by switching in the long run.

Greg, that's a solid advice - run your numbers based on market price, not on Section 8.

IF you were to renovate a non-conforming unit, that unit would now need to be brought up to code.When or if you rent out the unit, you, of course, run the risk of the tenant calling the city and saying the property isn't up to code, which would, in turn, cause an inspection by the city and likely result in some violations that would require you to bring the unit up to code.These types of units are ALL OVER the city of Chicago and be rented out on a daily basis, but there is still clear risk associated with renting them out.

In my case it's closer to the end of the 1yr lease term which runs until April.

Since you're aiming to purchase a multi-family property in Long Island, especially with the help of a capital partner, it’s crucial to run the numbers carefully (rental income vs expenses) to ensure you’re set up for success. 

We purchased a property in early October and are placing it in service this week (mid November).We had intended to run a cost segregation study and try to accelerate depreciation which we can deduct against our W2 (assuming material participation).However, we have been reading through the IRS guidelines (eg publication 946 on Property Depreciation) and there seems to be the concept of "short year" which would mean that we can only deduct ~1.5/12 of a year's worth of depreciation in 2024.Is this correct or are there any different rules for STRs specifically?

Would you be open to a quick zoom / phone call so I can ask a few more questions on how you run your operation? 

If you materially participate in the LLC’s operations, you may be able to treat the income as active.Material participation in a rental activity, with or without an LLC, still runs into PAL rules.

I don't know how you can successfully run a short-term rental business with that mindset.