If you are not Materially Participating, the loss will be reported on Form 8582 and like be classified as "Unallowed".The ordinary loss from Schedule E cannot offset the Schedule D capital gains. 

I got this e-mail too.

Quote from @Rebecca E.: @Katie MillerI came here because I just had my yearly with my new accountant.

E Equity, how much of the home will you own on day one.  

I googled it and found this:If you rent it to tenants, you would treat it as a rental and report it on a Form Schedule E.

You can however, write off the other unit as a rental on a Schedule E.

That comment also seemed to imply that you don't report the rental on Schedule E if you have an LLC, but that's not correct, with a single member LLC it still goes on Schedule E."

I'll wrap this post by pinging two other Japan-based American investors for their thoughts (until they actually tell me to stop doing this): @Steven E.

As eric pointed out, someone who lives in Phila will have to be registered as a manager of the property to obtain a rental license - usually a PMPersonally if you're looking to target SFH I would recommend: Roxborough (for 3+ bedroom - there is a large saturation for 1-2 bed apartments in area), East falls, E and W Mount airy (need to be proficient in neighborhood to know where the good and not so good blocks are, and far NE philly.

A CPA can ensure proper filing of rental income on Schedule E and help identify tax-saving strategies, such as optimizing deductions for maintenance, repairs, and travel.