That was assuming you qualify to take the entire loss in 2023. 

If I assume NO property value change, in 30 years, the WH property will have turned $383K (down payment plus $800 monthly negative loss of running the property) into $459K.

So if we underperform the pro forma and we end up losing up to $100k on the deal, he would share in that $50k loss and I would eat $50k of the loss.Is that what you mean?

According to the Fair Housing Act and the Americans with Disabilities Act:Even if a landlord has a no pet policy in place, the law does not consider service animals as pets and therefore the service animal is exempt from such a restriction.Service animals are allowed anywhere a person would go, including food areas that would normally restrict an animal’s presence.Landlords cannot charge a pet deposit or pet fee for service animals, however the tenant is liable for any damage that the service animal may cause.Landlords can require written verification from the tenant’s health care provider that they are disabled but cannot ask for any specifics about the disability.Landlords can require written verification from the tenant’s health care provider that the service animal is needed.Landlords can request copies of the animal’s health records to prove the animal is in good health, parasite-free and immunized/vaccinated.Landlords can write warnings or even evict a tenant with a service animal if the animal is disturbing others, posing a threat to others or causing considerable damage to the property.In other words, you can ask for appropriate paperwork concerning the tenant’s need for the service animal and to verify the animal’s health. 

Hope things improve moving forward for you and in the grand scheme of things, $2600 loss I would just chalk up to a lessons learned and one you can continue to teach others about in the future.

Or should we accept the potential loss on the second room if it remains unrented?

I have some rentals and have more depreciation than what they rent for so if I was able to classify the new construction as passive income, I could then use the "losses" from my other passive investments to help offset the income.

I am a bit of a pizza snob and when I am in a new place I look for a good spot and if its rated 4.7% with 5 star after 5 star review and I see a random 1 star review saying the food was terrible, do you think I let that discredit all of the raving reviews before and after it? 

If the builder miscalculated or overlooked on certain items, now they are making very little/nothing/lose money, either they will honor their word and still finish the house for you at a loss, or they just stop showing up to your job.

Indeed, most CPAs will tell you that passive losses cannot be used.