Ideally, you have the terms for doing that outlined in your property management contract.

We outlined our responsibilities and our business philosophies to make sure we are compatible.

Demolition and Removal: Outline areas to be gutted or removed (walls, flooring, fixtures, etc.). 

@Kevin Hubbard - Dave Foster did a nice job of outlining the mechanics of transactions.

The LLC would own the property, and you could outline each partner’s equity share and responsibilities in an Operating Agreement.

The IRS requires the hours to be specifically in real estate trades or businesses, which typically means activities directly related to owning, developing, operating, or managing real estate properties.IRS Publication 925 outlines what counts as real estate trade or business activities, like development, construction, acquisition, management, leasing, and rental operations.

You just need to supply them with a scope of work that outlines what you will be doing to the property.

Perhaps not a trend to consider across the city but any neighborhood that would attract college educated young professional families seems to be a good bet if you wanted to focus on this asset type.I plan to build 12 townhomes as a second phase of a condo/townhome project in a good area of Mount Airy near the Chestnut Hill boarder and even though I’m likely to years away from being ready to begin phase 2, my current plans are to keep the 12 homes as rentals for the precise reasons I outlined above.  

@Mike Hern so long as you hit the criteria outlined, I would treat as a STR.

The deposit belongs to the tenant, not you, so it shouldn't be subject to any terms outlined in the PM Agreement.If you have a written contract, I recommend you dig through it carefully to understand what you agreed to.