This benefit allows the owner’s estate or heirs to receive the property at a new, higher basis—reducing capital gains taxes if they choose to sell the property after inheriting it.In short, partial disposition allows tax deductions for retired property components during ownership, while the death step-up basis resets the property’s depreciated value, providing tax relief for heirs.

@Landon Sheveland People do fix and flips while living into the property to classify the property as primary residence and not pay any capital gain taxes. if that is your intention, don't use LLC to establish this as your LLC.If your goal is different compared to what I said above, you can use LLC.

So after long term cap gains tax eats about $20k.

@Tom HallAt 7% if you can I would pay it down as investing it net after tax gains may not get you the 7% you are paying - so it’s less riskDownside is you lose liquidity of that money as it’s tied in your propertyIf rates come down in future you can refinance and even take some of the cash out.Regarding your question are rates coming down, a lot of factors come into play but right now it does not appear there will be significant changes to rates over next 3-6 months.

ESPECIALLY if you’ve lived in any of them 2 of the last 5 years and can take the tax free gain. 

Solo 401(k)s are not subject to UDFI (Unrelated Debt-Financed Income) on the capital gains from selling a debt-financed property, per IRS rules.b.

The challenges in real estate teach you invaluable lessons that you might not gain otherwise.I also invest in Chicago, so I have a few thoughts in response to the questions you raised.

I don’t know your exact situation, but I expect principal paydown and appreciation to cover the $200 and still give you a nice gain.

Are you prioritizing short-term gains over long-term wealth?

I’ve focused mainly on Florida but have also looked at options in Sacramento and other slightly more remote locations in CA.While I’m familiar with value-add strategies (ADUs, renovations or storage rentals), these seem like heavy lifts for modest gains.