I have been renting out the first home to a family member under no official contract, but i want to establish it as an investment property.

Glad to hear that you are using Equity Trust already as they happen to be our official partner for self directed IRAs. :) It sounds like you are looking for a specific investment opportunity? 

You might consider: Consulting a Real Estate Attorney – Your emails may possibly prove misrepresentation.Requesting Public Records – A FOIA request might reveal why the city denied you but later approved the duplex.Escalating to City Officials – Bringing this to local officials could expose inconsistencies.Exploring Tax Write-Offs – A CPA might help offset your financial loss, if it is possible.I’d definitely seek legal advice.

By working closely with hosts, legal teams, and city officials, PadSplit successfully defended its model, ensuring continued housing opportunities for those in need.With this case setting a precedent outside of Atlanta, it strengthens the argument for more flexible and inclusive housing policies.

Since you're using a GC, make sure they are properly covered.

Generally, a loss can only be claimed in the tax year when the investment becomes completely worthless or when there is a final determination that no further value will be recovered.If the REIT has officially liquidated, been declared insolvent, or issued a final report confirming that no additional distributions will be made, you may be able to claim the loss on your 2024 tax return.

I've got a proper manager as I'm out of state, but as I've got only this property, I have no other reference point.

While there is no official holding period, tax advisors recommend keeping the property under the trust for at least 12 months to meet the "held for investment" requirement.

We have our insurance through Proper.

You'd also need to establish a budget, and secure a master insurance policy. i THINK you need to do these things before reaching out to your municipality to have it converted officially with the county or city but they would be the first ask for steps in order.i will add, this would make financing on these units a bit challenging, as in the mortgage world, at least initially, they would be considered "non-warrantable" condos.