First the definition of section 1231 property:http://www.investopedia.com/terms/s/section-1231.a...Now links to counter the opinion of the OP's accountant:http://loopholelewy.com/loopholelewy/15-selling-yo...http://www.keithbakerlaw.com/documents/TaxLawExpla...This link is the one your accountant should follow in determining classification of gains and losses:http://www.cpaexamacademy.com/lessons/regulation-r...

Investors run the very real risk of getting burned badly when they use these very rudimentary classifications.  

It's a basic economic class if you ever attend one.

All I had to do was pass the DC Law portion of their test and take an additional Fair Housing class.  If

IF, you needed to elect an S-corp classification you would submit Form 8832.2.

Source of income is a protected class.  If

If you decide to go the turn key route, here are things to look for in the turn key company and what to avoid: Don't allow financing or a finance contingency (it can be a good indication they are selling above market value) Don't allow for your own independent property inspection Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors) Require you to pay for any renovation upfront Sell only in cheap. low end neighborhoods Don't accurately represent the neighborhood/property classification Don't have consistent rehab standards for all properties Don't provide a scope of work for the property Can't provide references of repeat investors Require you to close before a tenant is in placeI've been active in Indy for nearly 10 years and know the market well.

We can also see the "concentration" of rental properties per zip code (vs. all residences), which when combined with an "A, B, C, D Neighborhood" classification system (see this blog post for a simple explanation) can paint a pretty specific picture about what micro-markets might work for a given niche & strategy.

I agree with your classifications. 

I'm mainly interested in single family homes, duplexes, and 3/4 unit apartments, but staying in the residential property classification for now.If all goes well I should have my first property under contract on the 15th; a 2/1 home in Durham for 25k.