Good class if you’re just starting, or already an owner.

@Paul AllenHi Paul,De-granularize the classifications and tax everyone at the Real Estate Professional level as the default.Barbers do not have to write down every clip of hair they cut and every comb they make and qualify as a cutter or a comber.CPA's do not have to write down by the minute, every thing they do during the day in a personal journal, to qualify for tax treatment as a tax consultant or a bookkeeper.That would seem absurd.The personal micro-tracking is an onerous requirement, that could be easily frauded by those who would want this tax treatment anyway.Just my 2 cents.

I wouldn't worry about why or how, just realize that they are not operating as best in class if they do not own what they are selling.  

Decide what class you are comfortable with and then make sure the particular property fits that class. If

Changes on margin of your debt to income ratio (by playing with your repair/capital improvement classifications) are not going to make a real difference except in highly unusual cases.Bolster your reserves.

@Tony Kim No effect on classification of income as passive vs nonpassive.

“Z”; $2,736(no other box in Part III is used.)Supplemental information for the 1065 states:“CLASSIFICATION OF INCOME AS PASSIVE OR NON PASSIVE AS IT APPLIES TO THE IRC SEC. 1411 NET INVESTMENT INCOME TAX MUST BE DETERMINED FOR EACH INDIVIDUAL PARTNER.

As for the rentals, I am learning to look for:- are there similar properties available for rent- have any of their rent recently reduced- overall neighborhood classification- access to stores, major highways etc- schools already in session so may not be lucrative- cash flow and IRR ( I am still figuring out IRR)Kudos for trying to help out friends.

The areas however within that classification tend to have nicer areas and that is where the developers are doing projects.

This is the fundamental problem I have with Wall Street who takes too much fees off the hard-working efforts of the middle class. If