First you need to do a quick feasibility exercise to determine if the project will work financially.  

I’d Atleast make them knit sweaters or bake cookies to sell on the open market to off set the rent loss !

I'm being serious after construction costs etc you could have a massive loss on your hands .. research hard before making your decision.

REP status does not guarantee treatment of rental income/loss as non-passive, to get that you need to document 500 hours of property management.

When the property is sold they will actually have a loss to report because they take the value of the property on the date of the owner's death and can subtract commission, closing costs, etc. 

Due to being transparent the seller called me 4 months after our initial conversation and stated although they will be taking a huge loss they just need to sell it and move on.

Often the lender takes a financial loss too. 

Passive income can be offset with passive losses.

Drop the hammer now and cut your losses as fast as possible or the bleeding will continue, otherwise hang on for a wild ride and it won't be fun.  

If us newbies were to do this 5 times to get 5 quotes as Brett suggested it would be much less feasible to try and wholesale.