In practice, legal proceedings are very costly and time consuming (from a few months up to 2-3 years).

It simply is not worth the opportunity cost. 

What if I am a part-time agent to qualify for the REP status via mainly RE agent activities (helping others in buying/selling houses) and then also have a couple of investment properties on the side that I manage myself to attain passive loss from those properties (via depreciation)? 

House hacking is essentially the cheat code to get started into real estate investing.Generally done by utilizing FHA loans and 2-4 unit properties.Basically, buy a primary residence, live in it or one of the units for 12 months, move out buy again and do it all over again.Each time you can utilize fha as long as you refi the former before you use it again.Great way to buy a lot of properties with low entry cost!

I used a program in Minnesota to finance a small downpayment with a no-interest loan, then had a loan from my parents to fill in about $5000 of costs.

I'm an experienced investor, agent, and a project manager for an established general contractor, focused mostly on historic preservation, custom homes, and investment properties (flips and holds). 

Thirty years ago, it cost me $600 in labor and parts to replace a 50-gallon hot water tank, currently $1,500 and often they only last 6 to 8 years. 

Costs to cure.

You could promise a certain amount of closing costs then take a few grand off at closing.

A few things to consider: are you increasing rent each year to at least try to recoup some of the additional costs (everything goes up, so why should the family member not pay more-if it is your parents, it is more complicated), how much has the condo appreciated over the last 3 years since you bought it, and what would you do with the money when you sold?