This property also plays a strategic role in the broader development project for the area, which includes 12 patio homes and two duplexes.

@Catherine Curtsinger To play a little devil’s advocate I have been house hacking for 30 years.

What incentive is there for them to perform well on the deal if they have already made 18k off of you and it is only your money at play. 

Quote from @Sebastian Bennett: It's funny because I actually had a dream of setting these up and seeing how this would play out lol

Their goals and upcoming upcoming purchases may come into play. 

It's a really high-energy dog and I don't think they take it out often enough, so they play indoors a lot.

Like with anywhere else: location, pricing and the overall house you intend to build will play a factor in your profits.

Preference is cash-flow, but open to appreciation/equity plays as well. 

So, you're not "wrong" in thinking it's complicated.The tax code plays heavily into how certain transactions are categorized and there is some flexibility regarding what we can capitalize versus deduct.

Like playing loud music in the middle of the night if you upset her which goes through the walls.