I'm considering partnering with a non-profit that would manage the sober-living program; with me just providing the house passively for rent on a per bed basis. 

For investors, would earning passive income through property cash flow (without actually owning the property) be appealing?

I would apply the cash flow to pay down the debt and hope to have significant passive income (or equity to put into something else) in 10 years.

This is most of the depreciation you are taking year one.You can calculate your depreciation recapture by taking the sale price of the asset and subtracting the adjusted cost basis.The adjusted cost basis is what you paid for the asset plus any improvements you made along the way minus the depreciation you took along the way.The profit above this original cost is taxed as a capital gain, but the part linked to depreciation is taxed at a maximum rate of 25% under the unrecaptured gains of section 1250.To recap the tax rates are:- Sec. 1250 real property: 25%- Sec. 1245 property and 15 year 1250 property: Ordinary Tax RatesThere are ways to minimize depreciation recapture especially if you know how to work smart with your CPA.1) Asset Valuation at Time of Sale - Sellers can minimize recapture by reallocating the price of the assets on sale.

Given your previous career, your goals, and wanting to diversify your investments, I'm wondering if you might find value in the PassivePockets community, it's a community with private forum dedicated to passive investing in syndications.

Owning real estate is not passive.

Talk to an accountant prior to doing the cost segregation study.You want to discuss whether it will be beneficial or not.In general real estate is considered passive which means that it can't be used to offset other forms of income such as wages, interest, dividends, capital gains, etc.However, there are some exceptions where the real estate loss can offset these types of income.best of luck.

Additionally, your brother would inherit your cost basis in the property, which could result in significant capital gains tax if he sells the property later.

Absolutely, the passive income from owning rentals is great but I also love getting into big projects and seeing the transformation from start to finish@David Jesperson What city/market are you looking to buy and what type of properties are you looking for, SF, 2-4 MF, or 5+ MF?

Just trying to gain a sense of hot or cold.