@Mark Kuster to qualify for the tax-exempt capital gain treatment in OZ's it would have to be a new build or significant renovation and capital gains would have had to been used to purchase the building through a QOZ Fund.

Next week got a notification on door about having drug activity in hallway of billding.

Based on my experience it will take a few "treatments" where the pest control company is leaving bait and traps.

Generally tax status is established by filing an 8832 or 2553 if electing corporate tax treatment, or by filing an initial return if electing default status.You'll want to run everything by your attorney and CPA as it seems you're going with a semi-complex structure.

If, after inspection, you decide you don't think the tenants are a good fit (hoarders, signs of drug use, etc.) you an always put in the contract that the property is to be delivered vacant.

There was a small fire in the downstairs den area so I'm thinking that it might have been a drug lab related fire because it is selling for so cheap.

Then I get to wait for someone to accuse of me of disparate treatment of a protected class or, preferential treatment to another class.

My understanding is that the tax treatment is the same as if I were using that amount to buy a separate rental property.

you don't want to turn your primary and its take free equity into a rental .. the tax free sale of a primary is the number one best tax treatment in my mind.. if you want to move on sell it take your money tax free then go shopping for rentals or house hack or whatever.now if there has been no run up in value that creates a tax free situation vis a vi equity.. then probably does not matter

If they refuse, evict them and get them out.You may also considering screening all your current occupants to clean out any drug dealers, sex offenders, etc.