Tell them you will conduct a final walkthrough to ensure there is no damage or deductions to that amount and as long as it is returned in the same state (excluding normal wear and tear) they will receive the full refund.

Matt,See IRS publication - https://www.irs.gov/taxtopics/tc701"If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.

It seems as though most residential investing falls into one of these three silos obviously excluding multi-family.

You must have own and resided in the property as your principal residence for 2 out of the past 5 years, but if you meet that requirement you can exclude $250k of gain from your federal income taxes ($500k if married and filing a joint tax return). 

For example, many landlord policies exclude pool liability coverage, especially non-admitted policies such as many underwritten by Lloyd's of London. 

@Sean McClureHi Sean,Here are my thoughts on this.If it were mine (excluding trying to pump the appraisal from the question because it's an owner/operator SFH vs flipping it).Overall, I would be concerned with not over-improving it for the amount of rent it will attract.First I would figure out the minimum that needs to be done to attract the average rent for the area (base on what the competitor rentals have that are getting that rent), and what (if any) modernization's (wall color, 3-prong outlets, Carbon Monoxide detectors, etc...) need to be done (to make it safe, and desirable to an average tenant in the area), then decide what "Hardening" needs to be done to it, to make turns, maintenance and ownership less costly.Good Luck! 

The monthly rent excluding the 2 open rooms is $5,750.

This only applies to FHA loans.Context:FHA for an owner occupant was the only Agency loan product (excluding VA) that would do 85% LTV cash out refinances.

This only applies to FHA loans.Context:FHA for an owner occupant was the only Agency loan product (excluding VA) that would do 85% LTV cash out refinances.

At which time you sell the colorado place and like dan said, if you lived there 2 of the last 5 years exclude capital gains and use that to pay off any debt on the NM primary residence.Im not an accountant or tax advisor, so I would consult one of them.