I wonder if there’s a minimum size for that law or if small time operators get a pass?

You're pretty much acting as tenant and property manager so need to show why they should allow you to operate a mini business from their home.

Since then he has mostly bought apartment complexes and has never lost any money and talks down about owning less than 32 units which usually allows you the chance of hiring an experienced Property Management Company to handle the daily operation that includes the screening and maintenance and you just manage the managers and get regular (once a week) financial statements and you still have positive cash flow.

Here's my question: Could my expenses to fix up the house (it needs a lot) be used to offset the Penalty and tax I will generate from using this IRA?

Here's my question: Could my expenses to fix up the house (it needs a lot) be used to offset the Penalty and tax I will generate from using this IRA?

It is a very serious mistake to allow personal feelings to dictate your business practices however in your present situation you are clearly preferring to operating as a hobby investor.

On the deal I closed last month, the system the seller used could not generate T12s so I asked for and received monthly P&Ls going back five years. 

You might want to separate the asset holding (passive) from the operations (active) side.3.

Here’s a deal in WACO that i want to place an offer:CLASS - C/C+Units - 14 + duplex = 16Mix - 2 BED 1 Bath Rents = 575 averageCap rate 9.2 % actual (Or So they say)Previous owners bought it for $545k List price = $680KAll bills paid communityTotal operating expenses -$55kNOI = $62KCash flow is around $2.4K / month100% occupied with rent roll6mins from a a good university Numbers check out on paper, value add opportunity is also there.

I'm going to be financing the deal. found a few ranging from 260-330K, All 4 plexus all leased out also. one generating $3450 month and the others are around 4k month.