Poor Tenant Screening = High Risk of Rent Loss & Property DamageGood property management starts with tenant screening.

For example, tell it that you have a rental loss $X from a property, and that the Unallowed losses are $Y, and the Qualified Business Income Loss carryforward is $Z.

I’m assuming you have a good salary job that you and your wife participate in.  

Any tax knowledge of if people doing this strategy are able to take the losses from the cost seg study (on the ADU) to offset their W2 income?

You are correct passive losses can only be used to offset passive gains. 

It could also be the result of job loss, career switch, free lance work, self employment, spouse wanting to stay home with newborn, pay reduction, or inability to sell existing home, moving job locations, or any other “life circumstances”.After thinking about it, my opinion on the “ethics” of entering a lease option as an investor with a homeowner/consumer rests on two issues.  

@Devakumar Sai Chinthala There are income limitations for passive losses, you should check with your tax professional.What will the property taxes increase to after you buy the property?

During a roofing job, the contractor’s brother-in-law fell off the roof and tragically died.  

However, my other properties will depreciate for tax purpose, therefore I have paper loss, but I still cashflow on those.

A 50% decline in asset value would result in a $10,000 loss, double the loss of the unleveraged asset.