In my opinion, knowledge and experience is what keeps people in that asset class. If

@Geordy RostadWith the first deal I'd be able to pick my own tenants as well I just think they'll be lower class. If

NOO STR permits are only issued for properties that fit in a certain Commercial zoning classifications. 

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.