You must work at least 750 hours per year in a qualified RE business.So most people who have high-earning W-2 jobs outside of real estate won't qualify.But the unique thing about RE pro status is that even if you don’t qualify but your spouse does, you can both file jointly and claim the losses from your RE investments to offset your other active income together.It's an incredibly powerful benefit if you do meet the criteria.

So I would caution everyone to make sure the replacement cost for your improvements will realistically cover your actual replacement cost in the event of a total loss.

@Chris Morris have ALWAYS seen bad "deals" from rookie wholesalers that really don't understand what they are doing to provide value to the industry.It's getting worse because the real estate market has recovered from the 2010 Crash, yet many are still using tactics & methods developed during this time.Everyone in the industry needs to go back and look at what was being done BEFORE 2010 and start using those methods, updating them with current technology.

I know it's a long shot, but I'm currently having lawyers review the signed subscription documents to see if there's any way to minimize the losses here. 

No, it would be a total loss.

And you now have to file three tax returns:- partnership tax return- your individual tax return reporting 1/2 of the partnership losses- your partner's individual tax return reporting their 1/2 of the partnership lossesAnd while partnership return can be DIY-ed, it probably should not be.

Chalk these losses up to tuition. 

The refinance step is where you pull out this equity, typically in the form of a cash-out refinance.Here’s how it works:You refinance the property at its new appraised value (after rehab and renting).You take out a new loan based on that increased value, ideally for the full amount or more than what you originally paid for the property.The goal is to pull out enough money to cover the cost of the original purchase and rehab (or even more, depending on the property’s appreciation).This allows you to recover your initial investment, which can then be used to buy your next property.5.

I would imagine the LLC will have its own EIN, but we will still report the gain/loss as pass-through income on our joint tax return.

Would you have net income or net loss without the cost seg study?