I also consider properties where there is a big lease loss factor. 

I knew almost nothing about how to maximize returns in the mutual fund market and the handful of funds I could invest with through my former employer made it pretty frustrating.I invest in leveraged real estate with my SD401k, so UDFI isn't an issue for me, but I have plenty of clients who invest with their SDIRAs, and it still isn't an issue.Just as with other rentals, the properties cash flow just fine, but after depreciation, there is a tax loss. 

I saw a lease loss opportunity on this one.   

That said, there are downsides:  potential losses, greater risk. 

This should cause just about all of that $2.4M loss to roll to 2018 as a passive activity loss carryover.Here is my question:   Let's pretend I cannot execute the 1031 exchange for whatever reason.  

The Partnership will then distribute a K-1 to each investor indicating his share of income/expenses.The great thing about living in Texas is that you may not be required to file a state tax return as long as the property is within a state that does not have an income tax(Texas, Florida, etc).If your adjusted gross income is below $150,000 - you can offset the losses from your rental(buy and hold) against your other income(w-2, interest etc).

The risk is a couple months of rent vs regular insurance which covers loss of the house or lawsuits both of which could be hundreds of thousands of dollars or more depending on the situation.

If the loss deal falls through, after you spent all the money, the capitalized cost is taken as an abandonment loss.

Like Nathan mentioned above, it's best to figure out all expenses (property tax, insurance estimated, cap ex, vacancy loss, management) before considering the deal. 

There are some cases you can argue it a capital gain, but since the short-term capital gain is taxed as same as ordinary rate, there is no tax benefit unless you have some capital loss that needs to use against the capital gain.