Hi John - Under the passive activity loss (PAL) rules, you can deduct rental losses against passive income. 

Put the profit towards a new Primary residence and ~$50k towards a rental property.2) Rent it out and eat the cash flow loss, hoping rents increase.

My partner however is NOT a real estate professional and won’t be able to capitalize on the deductions as much as I will be able to due to their share of the “loss” being a passive loss.

Can you sustain the loss for a few years and repairs/turnover costs that can come up?

Short sales are where the bank would realize a lesser loss settling than they would completing a foreclosure.

I had invested in out of state RE in the Midwest before. buy & holds in OH that we ran into several issues with, incompetent PMs and lot of repairs required leading to losses and instability.2.

Otherwise, weigh your options with estimated vacancy and remodeling time, but how you may be able to mitigate losses longer-term with the higher rents you'll presumably be able to collect with new tenants. 

Check out this youtuber video about owner-occupants in areas of Florida having to sell at a loss. https://youtu.be/wpKpwUhPRrA?

In our case, our lease specifies that if a tenant wants to break the lease early, they are required to pay three months’ rent as a penalty and forfeit their security deposit.This approach helps cover the costs of finding a new tenant and any potential loss of income while the property sits vacant.

This delays evictions and often results in significant financial losses for landlords.