Not eligible for the new 20% deduction.The trick is determining whether the second part of your deal qualifies for the investor treatment.

I will list the numbers:current rent $1950/month (going to $2000 in about 6 months at end of 2 yr lease)My expenses: annual taxes $7950 ($662/month)                        Heloc balance $170k interest currently 5%                        land lord policy $1150/ year                        Self managed                        Maintenance : has averaged $300-400 per year.Reasons I am considering sale :   1) property is currently worth about $270k (making me feel roi is low).                                                           2) property has a pool which is a liability that I'm not completely comfortable with.                                                           3) property has a heloc balance against it of about $170k that I technically cannot deduct the interest                                                                       because it wasn't used for the property or any other rental.                                                           4) Tax treatment: my understanding is if you sell it having lived in it 2 out of last 5 years the capital gains                                                                 would be exempt. 

Ethically challenged, much?

If, in fact, bedbugs are found, the tenant will have to pay for the treatment.

Agree with @Carl Fischer that you should engage a tax CPA or EA to examine your unique facts and circumstances...However the distinction between who owns the roof is important and determines tax treatment. 

These are professionals with additional training and a stricter code of ethics.

@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.

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.

These are professionals with additional training and a stricter code of ethics.