Remember also that the interest on the loan is taxed at ordinary income rates.So for example lets say you have 100k and were making 8% in the markets - 8k per year and say you are in top bracket, you will pay $1600 in taxes per year or netting 6400.Now lets say you did a loan and were at 5% you are earning $5k per year (actually less because principal is being paid down and some of money goes into essentially a 0% checking account).

3-4 more tenants may sound great when it comes to income, but there’s a ton of work involved with screening the applicants and maintaining the people and properties.I’m not a fan of the one bedrooms myself.

Its a no income no doc product .

Could a long term lease could be written as a series of short term leases (less than 30 days), and thus qualify income from the rental as "Active" and thus allow the tax filer to file as a "real estate professional"?

What does your w-2 income look like?

You can go 5-8 unit on DSCR no income no doc .

Is there a way to structure the relationship so that I get passive income that offsets my passive losses, thus resulting in no tax owed?  

Knowing how much you can afford, knowing your market’s strengths and opportunities, increasing knowledge on financial matters are all important steps worth taking when planning ahead through assessments.In planning for retirement, through real estate investment, you can capitalize on it as a resource adding extra passive earnings, protecting the existing wealth, and expanding the investment base.

Unfortunately I was told they are not the same category of income so they don’t offset each other. 

You can put that money in the bank and earn $300/mo guaranteed.