If I am renting out a house at FMV but still reporting a substantial loss on Sch E for consecutive years, would this be considered a not-for-profit activity?

What's causing it to be such a substantial loss?

$13,500 in depreciation, taxes, mortgage interest and insurance.  Similar houses in this area rent for more, but this house had substantial water damage in the basement and basement was gutted by previous owners and left unused.  We have not had the resources to finish it and have had to reduce the rent accordingly.

No, as long as you have a profit motive and are renting for full Fair Rental Value, it is not considered a not-for-profit rental. You may want to document the damage if you are ever questioned as to why your particular FRV does not match that of the neighborhood.

More information.   For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Pub. 535.

Thanks for the info.  Thought that's the way it should be, just wasn't sure.  I have taken pictures of the basement for justification.