As some readers of this Forum know, there are two types of participation for those seeking the use of real estate losses:  Active Participation and Material Participation.  For REI over a certain income limit, in orde...

On a $80k property with even 5% rent to purchase price ratio, your gross annual profits aren’t that great in total and can be wiped out with one unexpected event like a furnace or sewer line or an eviction/vacancy or even something as basic as a water heater clapping out and leaking everywhere (there are a boatload of uncontrollable variables when dealing with low end rentals), so 5% on paper often ends up being 0% or worse and you’re just suffering the brain damage of managing a low end rental for nada.

Expecting tenants to keep drains clear is very reasonable and accidents happen for sure but there's not reason for the landlord to foot the bill for this IMO.

., renter burns house down, renter severely injured or dies on the property from accident, etc.)So we aren't sure if the homeowners policy would cover situations like that since they are related to short-term renters or if we can get STR insurance on a property we don't own. 

In the current environment, I'm spending money improving the properties so when the market turns I will have less unexpected repairs and maintenance, and can focus on acquiring more rentals. 

If town officials don't believe the repair budget will fit into that 50% appraised figure, or that there isn't enough allowance to cover unexpected breaks within 5 years they may not issue a building permit because theirs fears of an audited by FEMA.  

This week I faced an unfortunate and unexpected death from a relative, who was also my mentor on REI. 

You cant always plan on a global pandemic but make sure that you have extra money in the budget for unexpected costs Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

You likely did not have a misc for items like portion of umbrella, rental tax, book keeping and tax man expense, unexpected utilities such as for a water leak (not tenant responsibility).  

(this covers 8x the amount of damage caused by accident - not neglect).