Example: The value subjected to capital gains of the rentals will be approximately $400,000 due to appreciation. 

Skiing is probably the best example: when you stand on a mountain in bright sunlight with perfect snow and you want to hit the powder one more time, but your legs feel like rubber - that just sucks!

My properties are typical mid-grade rentals in good neighborhoods (ie, not luxury apartments). 

Example of a deal I did last year: Purchase $110k, Rehab $30k, drive rents to $14003.

The three tests outlined above are applied annually, so you may qualify as a real estate professional in one year and not in other tax years.It is also very important to document material participation.To meet the requirements of real estate professional status, it’s essential to keep detailed records of activities and time spent working on the properties so you can verify your real estate professional status in the event the IRS decides to audit your return.For example, you may keep a contemporaneous appointment book, calendar, or narrative summary of the time spent performing real estate activities.

For example, after dealing with the hot tub myself for a bit I created a couple training videos for the cleaner, such as how to empty the hot tub with a sump pump, refill, etc. 

Typically, in A-Class neighborhoods you end with a prospective tenants that are a little better off financially than most.I also own an LTR in Orange County (Costa Mesa) and I have had good tenants thus far. 

We also see that the SECT 8 typically pay higher than our market rents in many cases in the lower income areas of town. 

Lenders typically want to see 2-3 new builds completed within a 12-36 month period, depending on the lender.

You are correct in that your A/E split is typically going to be based on the rental percentage of the house.