I have excellent credit but since starting my business I don't have much savings and I make a fraction of what I used to make in software. 

0%.In reality, you can perhaps justify a small fraction of ownership for your self.

I don't know how much appraisals go for but I'm sure its a tiny fraction of the money he will make in equity alone. 

You have lost the prior qualification.Divide the two years of "qualified use" by the number of years that you have owned the property at the time of sale, and you have the fraction to determine your exemption amount.Therefore, if your "non-qualified use" period is 8 years, you will be able to exempt two-tenths, or 20% of the capital gains under Section 121, but this is the "true" capital gains, the difference between what you paid for the property and what you sold it for.The other 80% will be taxed as Long Term Capital Gains, and you will also have to pay taxes on your Depreciation Recapture for the depreciation that you took while the property was a rental property..Of course, you could defer the taxes by purchasing another investment property.I explain how to do this in my book.I hope this helps.Good Luck.Michael Lantrip

I am originally from PA and my question is if I should buy condo down here (2bedroom), or invest back home near Indiana, PA which is a college town and the houses are a fraction of the cost.

In both markets this cash flow at around this time is approaching the historical S&P but if you have financed the RE, the return is based on only having invested a fraction of the entire value. 

@Michael Upshur, There's a lot of folks taking gains through 1031 right now and beginning the move into passive fractional ownership.  

If you aren't (even if you are) ........... gosh, this sounds promotional, look at my blog "Let's play TIC, TAC, TOE" it allows you to be an owner partner and your TIC Agreement governs the arrangement, you just buy a fractional interest, that's all you need!

Because of the income issue I have only qualified for a $50,000 equity loan, A fraction of the equity I've built up over the last 13 years.

It seems to me that, like a bank, only a fraction needs to be kept on hand for paying either for repairs, unpaid rents, or returning at the end of the lease.