As soon as you close get an insurance policy that will protect you if there is a loss.  

Then you need to agressively pursue whichever option will cut your losses short.

Instead of a passive activity loss, here we will be talking about a passive activity credit - that is a credit generated from a passive activity (i.e. solar panels on a rental).The credit generated from passive activities will only offset the tax generated from income derived from passive activities.

@Joe S.If it a property that appreciates, then use the nett loss from that to reduce any taxable income from the rest of your portfolio.

The risks/rewards should be asymmetrical, meaning there should be more upside potential in the profit than there is downside potential in the loss.

There is a good reason the seller is offering such a low price, and my guess is he is cutting his losses.

I know the seller will have his own feelings on what he'd be willing to do, given that a large gain/loss could have tax implications for him and his business, but I want to be prepared to move forward with whatever option is available. 

a lot of little wins can be taken down by one big LOSS..

Frequent things that go wrong in flips (in Chicago)Estimating rehab costsHow to make sure you are property analyzing ARV comps buy to make sure you are not at a loss after its complete

You do of course run the risk of them coming in and shutting it down, but in situations such as these I always like to ask myself how things would come across if there was an injury or loss of life and I ended up going to trial.