Seeking Real Estate Tax Gurus!

[Jon Quijas]

Hey All,

My wife and I are novice investors/landlords and we are both from poor families who have had to work for every single thing we own. I am seeking for some advice/guidance (I will also be meeting with a real estate tax/acct.).

Scenario 1: The market tanked and we were able to purchase condo A for $235,000 in what is now one of the hottest real estate markets in the country: San Jose, CA. It was our first property and it was our primary residence from Sept 2012-April of 2015. Then in May of 2015, we purchased a second property House B (for space). From May 2015-current, we have rented out property A. We make about $700/month and owe about 207,000 on it. Property prices here have gone through the roof and our neighbors house just sold for 510,000. It is my understanding that I have until next year (because it meets the IRC 2 out of the last 5 years criteria) to sell it and walk away without paying capital gains. 

         Questions: 1.) Do I still have to repay the depreciation for the two years that it was rented?

                             2.) Other than a 1031 Exchange, are there any other scenarios where I can not pay my gain taxes?

 Although Google will be moving close to where the condo is, I think prices may appreciate; however, with prices increasing, that means if I ever decide to sell, I would have to take the long term gains hit. Correct? Also, I have to repay the depreciation.