I currently own the house free and clear. current price, which is already been lowered a couple of times represents about a 1-2k profit after all holding costs, rehab, acquisition. if I drop another 5k, it will be $3k loss.

I think it is important to weigh the risk factors from a legal perspective AND the tax ramifications from a financial perspective before making a decision.Are the overhead benefits from a tax perspective outweighing the potential loss from a lawsuit?

I am not looking for someone to share in profit/loss as a capital investor, only for someone to act as a lender.I want terms that would not be available at a bank, and I'm willing to pay a rate high enough to make it worthwhile, I just don't know if it is legal to ask publicly for this type of service.Thanks

If it results in the loss of your holdings, there could be any number of reasons you may not be able to refinance in that time frame, some of which could be out of your control - locked up credit markets; loss of home values in the area; ETC.

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.