You would have to prove loss that was not mitigated by the sale and loss of rent.

I don't know where 350/month rent gets any tenants where you won't be having rent loss issues.

Hopefully the IRR approaches 20%, but it could result in loss of investment.real estate: historically low risk for long hold.  

Same answer as before, as long as we classify it as a business, we shouldn't be concerned about losses - because it will off set the other income.

Not only that but you can automatically screen tenants with an application and credit and background checks, collect rent through the app that will automatically be deposited into your account, automate late fees, itll send emails to your tenants when their lease needs to be renewed or when there rent is due soon/late, it'll automatically generate profit and loss statements and tax documents and more!

As the market levels off or declines we could see steep losses for some bidders. 

Make sure you also work with a tax professional to ensure you'll be able to utilize those passive losses- And that the cost benefit makes sense. 

When we run our number to determine profit and loss over 5 years we always assume an increase in taxes along with other operating expenses, which then drives how much income (rent) we need out of the property to make our numbers.

Your CPA can allocate the cost between all the residences and then you can split the sale accordingly and get your exemption, and either report the gain/loss on the rentals or do a 1031 exchange.

You might be intentionally creating a business loss on the taxes that might run the risk of getting an Audit?