Basically, I just don't know if the status as an illegal garden unit (the lack of ceiling height and zoning allowance) prevents me legally from using the space for anything at all. 

I also don't know if there's a specific process we have to go through with the city for it to be recognized as a duplex down.Basically, I just don't know if the status as an illegal garden unit (the lack of ceiling height and correct zoning) prevents me legally from using the space for either of these ideas and legally, or if it's just dead space. 

The two that come to mind are marital status and parental status, both of which will hit you limiting to one person. 

He was thinking I needed to meet the rep status but no way was I because I had a w2 that year.So, track your hours for material participation and work your w2 without fear.

I run an AirB&B (with superhost status) in my home so am accustomed to sharing my space with others and being respectful of other's personal space.

You likely won't be able to offset the rental loss with your W-2 income unless you can claim real estate professional status or operate it as a STR and self-manage it.The answer won't change even if you own the property inside of an LLC.Best of luck.

Financial Preparation: Determine how much you can afford to invest and evaluate your present financial status.

CONTEXT-(30k in credit card debt, split between 4 cards, mostly in charged off status)(one vehicle loan that was charged off, is now caught up to current, not paid off, 50k original loan amount)(some card companies are contacting me trying to make a deal, so likely only have to pay 20k of debt off.

Value add, which means a non-performing asset wouldn't even achieve a yield on cost of 7% after rehab and brining it up to performing status in Dallas.

The fact that it loses money is somewhat mitigated by my tax savings at year's end (I have RE professional status).You just have to keep in mind that although there's a lot of tourists to the area a lot of them are cheap bastards that gravitate towards the lowest fares out there, and there's so much supply especially in the last 2+ years that it's a serious race to the bottom as you're competing with people who bought at $150-200k 10-15 years ago, never fix up their place and don't care if they rent for $99/night.