Karin,I know I’m a bit late to this post, but I’d like to offer some advice for your future investments.

However, you can defer taxes under §1033 involuntary conversion if you elect to reinvest the proceeds into a similar rental property within two years (three years if the government condemns the property or threatens to do so, and four years for a principal residence in a federally declared disaster area).To reduce taxable gain, consider:Electing §1033 treatment and reinvesting the full $300K into a new rental property to defer taxes completely.Partial reinvestment, where only the portion not reinvested is taxable.Properly documenting all replacement costs and property details to ensure IRS compliance.Using cost segregation on the new property to accelerate depreciation and offset future taxable income.Since the §1033 election must be made, consult a tax professional to ensure compliance and maximize deferral benefits.This post does not create a CPA-Client relationship.

Below are summaries of each loan program for future reference. 

In the near future, we’ll be visiting The Shoals area in northern Alabama, where we’re considering a potential move this spring.

Also, if you have a below market interest note, if you wanted to sell that note for any reason in the future for liquidity you would be affecting the value of that note negatively.

This has the obvious weakness of the unknown nature of future cap rates, but that's really the heart of your question here.Estimating future cap rate is part art, part science. 

If you don't plan on allowing 4+ cats in your rental in the future you shouldn't start now.

Future land appreciation in this area might outweigh any tax benefits from buying in other areas, with a better (tax-wise) ratio.Before pursuing your plan, talk to a real estate accountant to figure out if you can, in fact, benefit from cost segregation.

Remodel while the property is still in your name to increase its basis, which can reduce future capital gains taxes, and take advantage of the capital gains tax exclusion if you sell within three years (up to $250K for single filers or $500K for married couples).

It really depends on your bigger picture and also what you are hoping to accomplish in the future.