If you are a real estate professional you can then not only offset income from the property, you can offset your ordinary income.  

If you have a wood deck or patio, it's your responsibility to pull any weeds. 

Finally, I imagine certain investors (either through syndications or active investments in real estate) amass a lot of passive losses which cannot be used to offset ordinary income. 

I bailed last second due to an attach custom covered patio that looked unpermitted and I didn't want to deal with the headache.

Exterior upgrades: remove and reallocate fence line to create a more private backyard, install modern 7' horizontal fencing, add large concrete patio in backyard, sprinkler system, sod, firepit, planters, etc.

We lived in it for 4.5 years and did little things gradually to bring it to life: new carpet in a bedroom, new bamboo floor in another bedroom, patio area with a pergola, seal coated the driveway, etc.

Therefore, the real estate is inventory to your business, and as inventory upon sale it is taxed at ordinary income rates (not capital gains).That is not a problem for your business; that is the correct treatment. 

I have some construction experience (but no expert) and on several of the houses we have looked at, I suspect a patio enclosure or addition has been added without a permit.

There are multiple ways to skin a cat…I know, kind of an odd headline for a BP post on an ordinary Saturday morning LOL, but I think it works alright!

It opens up a whole lot of areas that an ordinary account doesn't allow including ownership of real estate directly, ownership in LLCs, private lending, etc.