If they had not found the deal or participated at all, you would not owe them anything since it was off-market and they didn't play a role. 

Typically, you’ll need to use an online listing service, where you can either participate in a free trial or pay a fee to view listings.

To qualify, taxpayers must meet specific criteria demonstrating that they are real estate professionals who materially participate in their rental activities.How to Navigate the Rules:Step 1: Identify your real property trades or businessesHere is a list of activities that are considered to be a real property trade or business:RedevelopmentLeasingConversionConstructionReal property developmentReconstructionOperationRentalBrokerageManagementAcquisitionIf you participate in multiple of these activities, you may be able to combine them making it easier to meet the material participation hour requirements.Step 2: Demonstrate material participation in real property trades or businessesThere are seven tests to determine if you demonstrate material participation.

This range often lacks economies of scale and doesn’t attract institutional-level investors.

So there are many more participants at the novice level who may not understand the risk/reward nature of this type of investment. 

Curious to hear the system you'd recommend for tracking material participation?    

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?

One of the main benefits of participating in the Section 8 program is knowing that the rent will be paid each month (or at least the Housing Authority portion of it) - Now that's gone. 

However, if you or your spouse can meet the Real Estate Professional Status (REPS) requirements by working over your w2 hours in real estate and materially participating, the rental losses could offset your active income.

You need to actively participate in order for it to be successful.