Repairs made while the property is your primary residence are not deductible, but improvements can increase your cost basis, reducing future capital gains tax when you sell.

Don’t forget heloc, DSCR, 2nd on primary, borrow from retirement accounts, credit card cash advance, property reserves, home improvement store credit, etc etc.

And sometimes, we are not materially improving what you could have done  yourself. 

Gain is your net sales price minus your adjusted cost basis (purchase price plus capital improvements minus depreciation). 

You should only be liable for tax on any appreciation since you inherited the rental (minus the cost of your improvements). 

You would then stress to not incur any improvement cost above $22,000 or you may have to liquidate the property.In this scenariod, $60,000 if you are making an above return at 10% to 12% annually + $30,000 making $4% in a HYSA, the average return is maybe around 8%The blended return would be about 9%You may be better off investing in the stock market, get a slightly lower return but without all the added stress / work.

Combine that with some government austerity and the debt issue improves.

Market Analysis: Palm Desert seems seasonal, so the cash flow challenge might not improve significantly without some adjustments.

At the end of the day, losing $10k is really not a lot in the grand scheme of real estate investing, and given the seeming high volatility of this market ($275k to $220k, presumably in a matter of months), and the generally high monthly cost of HML, I would get out quickly and think of the loss as the cost of education.At least in my area (Cincinnati, OH) I don't see the market dramatically improving even as we get into the spring buying season, and, honestly, I only see mortgage rates continuing to climb for the foreseeable future, taking more and more buyers out of the market.

The cash flow does improve with the hold .