After two years of occupancy, qualifying for the tax exemption, and benefiting from appreciation, we chose to sell and reinvest the funds.

I'm not a tax expert, but I work with them.

@Bradley Buxton makes a very good point to make sure to do your due diligence as you won't be an owner occupant like your in-laws.Last bit of advice: Because this is a friendly deal, you want to take your time to make sure you structure it in a way that maximizes tax and cashflow benefits for both parties. 

Since my adjusted basis is about 50K, am I going to have a $250K gain on my income taxes this year?

For instance, Berea is a charming college town, but the combination of local taxes and less favorable price-to-rent ratios makes it less appealing for investment compared to other areas in the state.Agree here! 

 WE  do both  give me a call and I can explain but depends on where the tax advantage is

Also, as this co-living thing is generally new and catching on in some cities, I would hate to have this whole strategy ruined by a new restriction set by the city for co-living or the crazy rise in mortgage cost from property taxes and be forced to revert back to the traditional route.So my question is for those that are already doing the co-living strategy; are you all buying the home purely off of the co-living cash flow, or are you all considering the cash flow from renting the home with just one tenant as well?

-While rent would be more expensive month by month, the idea of being able to take my equity out of my home and also being able to reduce annual repair costs, property taxes, etc. does seem appealing to me. 

I purchased my first investment property through an online auction for delinquent property tax.

He owns 1031 Federal Exchange and is also a tax attorney.