Each area has pros and cons based on why you're investing and the life resources you are able to allocate.

Capital gains are typically reported in the year the sale occurred.Holding Period: Since you sold the first parcel in 2022 and the second parcel in 2023, you would report the gain from the sale of the first parcel on your 2022 taxes and the gain from the sale of the second parcel on your 2023 taxes.Cost Basis: The cost basis for each parcel would be the portion of the total purchase price allocated to each parcel.

You have guaranteed payments coming through and you can allocate your rehab dollars and buying another property on top of this one.

.- Planning to allocate the remaining $250K towards purchasing two properties in the Midwest market (e.g., Cleveland, Columbus, Indianapolis, Kansas City and open to exploring new areas where the entry point is affordable but the cash flow is stable).- Seeking properties that can generate $2K+ a month in combined rent after factoring in property management, insurance, and property tax expenses.Seeking Advice:- Would purchasing two houses in the Midwest to achieve $2K+ cash flow per month be a sound strategy, or do you recommend alternative approaches?

You have to allocate expenses between the two units, probably close to 50/50, and that includes depreciation.

Budget cuts have been hitting Sec 8 for years, allocations are of course based on budgets, this area has not had any new voucher authorizations for years, as others come into the area they bring their voucher with them and is then adjusted to local markets, you also lose those moving away.As pointed out by our new member, welcome BTW, there can be differences in operational administration, not to financial limitations or authorizations.

Your taking risk and though it can work allocate more to variable expenses than if you high graded things because overtime they will work out that way. 

I have a large rehab going on (my largest ever per sf) and only allocated 6 weeks for the effort.  

Pay cash for one and maximum leverage for the other (because you can allocate your proceeds any way you want). 

(The portion not allocated to land)If you depreciate that for 10 years @ $13,638/yr for 10 years. ($136,380)Your new basis when you sell is $491,000 minus $136,380 or $354,620.