Since tax bills are for entire parcels (typically, though not always) then it is highly unlikely that they somehow segregated the taxes for that small portion and paid it.

Now I have two vacancies and lower rents than when we started. 

I have supplemental insurance so I am of the mindset that they should get rid of this bogus insurance and lower my host fees..

Would the federal tax liability be $140k at year 5 for the sale, with long term capital gains (ignoring any Net Investment Income Tax)?

Unlike a mortgage the interest on your loan will not be tax deductible.

@Nicholas Haubner Contact Montvale's tax assessor and building department to see it is currently classified. 

I highly suggest you use our marketplaces to find trusted, investor-friendly team members: Tax Pro finder: https://www.biggerpockets.com/business/finder/tax-and-financ...Lender finder: https://www.biggerpockets.com/business/finder/lendersProperty manager finder (if you go that route and don't self manage): https://www.biggerpockets.com/business/finder/property-manag...

Smaller house cost, lower loan costs.

For instance, property tax & insurance expenses.

We keep good books, have legitimate and good tax returns and can show tangible real income on these units.