You will then pay ordinary income tax on the withdrawal amount that is commensurate with your income tax bracket. 

If you sell a property in one year or less after owning it, the short-term capital gains is taxed as ordinary income, which could be as high as 37 percent.

@Terra PadgettPaid annually… You have a lot better options I feel than 10% loan taxed at ordinary income and only paid once a year.

If 1.5 is out of the ordinary for your area then I’d go with your local norm.

No option but to sell to stop hemorrhaging...After selling can I deduct losses (including passive losses) against other capital gains or ordinary income by 3K?

You have a inside track to high paying STR/MTR residents, or something that is just out of the ordinary.   

I ran an analysis of a performing note at 12% vs. most rentals and the returns on the note were better than a rental.Note that income from notes is no longer taxed at ordinary income based on new tax law.

Or consider timing of other deductions into 2026 (if available) to offset that gain.Note that you cannot defer the ordinary income recapture, if any, that you have on the sale of your rentals into the QOF - only capital/1231 gains.

If they use nails, I instruct them to leave the holes and we fill them at no charge because it's "ordinary" use.

The K1 could show you have ordinary income, deductions, capital gains etc depending on what the investment opportunity was and how they managed and exited the investment vehicle.