REPS stands for Real Estate Professional Status—a tax designation that lets real estate investors write off rental losses (like depreciation and expenses) against other income, potentially saving a lot on taxes.

Flipping always seemed more risky and STR is riskier as well though it can be more profitable it can lead to serious losses. 

You may be able to get out of this bad deal with only your fees as a loss.

Put it on the scales, it's a loss.

Are you finding the deal, are you managing the deal (filling the units, taking care of the maintenance calls, making sure rent is collected), are you funding the deal or going 50/50 on profits and losses. 

Why we don’t like ARR (Average Rate of Return)It’s easy to skew the numbers.Here's an example of a positive ARR of 12.5%, but the investment loss is $50.Year 1 Start Value: $100 End Value: $25 Annual Return: -75%Year 2 Start Value: $25 End Value: $50 Annual Return: 100% ARR = 12.5%Am I missing something here?

Would depreciation on the equipment lower your taxable income, or do you already have tax losses to offset?

If the annual appreciation far outweighs the annual cash flow losses, it may be worth holding. 

The depreciation, repairs, and mortgage interest from the property renting will surely create a paper loss and help our somewhat high salary’s tax liability which is great.With the same thought, selling would do the exact opposite but would leave me with a chunk of change in my pocket.

Between now and then you can really crunch the numbers on rent vs. costs and decide how much negative you can stomach....at worst you still decide to sell in the spring and maybe it's a $40K loss instead of your current estimate.