My gut is it won't work since it barely cashflow now. 

So it will barely cashflow or break even. 

Then they will also be unprofitable and they will sell them, it is a vicious cycle and there’s simply too many STR‘s in the Poconos right now, the demand isn’t there and basically no one is making any profits off STR right now in the Poconos, they’re basically all losing money month over month on STREven right now in peak Summer season, most of my friends places are barely booked: they have low occupancy rates, and when they are booked, it’s only because they had to lower their prices extremely low like $100 per night.

I only drive on the interstate when I can use my peach pass or you will sit in traffic for hours barely moving.Lots of CA and NY buyers moving away from political views and government changes they do not believe in.

I hold two properties in an LLC, one property is currently a STR with less than 7 night rental on average and I provide hotel-like hospitality services and materially participate.

@Michael Plaks is spot on - character wise, 1099-R income falls in the same "bucket" as a W-2 wage would be, thus to offset this income with real estate losses, it follows the exact same pathway (ST rental with material participation or REP status with traditional rentals), but since you don't have all your time sucked up with a W-2 job, you have much greater flexibility to hit those related hours thresholds under those paths as well.No idea if he's taking clients - but if you are looking for local(ish) and qualified in TX, Michael is also likely a great one to reach out to.

No sub 2, no big leveraging, no “participations”  — if your aged grandmother doesn’t like it, or understand it, don’t do it.Mentors and gurus are not worth the money.

I guess the bigger question is, does the income on Property 2 look enticing enough to keep barely breaking even in hopes of the day we can refinance it favorably?

I would try and have 10% as the bare minimum for reserves but 15-20% is ideal. 15-20% of 200K is 30-40K so plenty of $$ if something comes up, you never know.

Not all participate.