I think this is a creative idea with a lot of potential, though also with some unique issues as mentioned above. 

It's designed to prevent taxpayers from deducting passive losses against non-passive income, which often leads to situations like you've described.Your concern about potential double taxation on the $2,000 net income is valid.

For example, I am a little concerned about some aspects of the business cycle recovery and a potential for a double-dip so I lean toward the safest part of capital stack which is debt (or low-debt equity).

Not completed yet, but we will be replacing windows, and doing a small interior remodel to add a second bedroom What was the outcome?

What are your thoughts on that project and potential roi. 

conversely, as i already mentioned, if you buy something distressed, you have the potential for greater returns... but it's not going to be passive.hope this gives you some things to think about

What was the outcome?

@Jenifer Garcia while these numbers all sound like there's great potential with this property, $50k in rehab can happen quickly!

We're in western NC right now with our first STR purchase, but I'm looking for properties with MTR potential.

I like to call yellow letter senders to network with whoever is sending them out, and potentially get on their buyers list, but this one wont even get that call.