Bad thing it's under a concrete patio.

I think the monthly interst will be taxed as ordinary income.Also is there an issue if the buyer is an llc and it would be investment property.

Purchase price: $299,960 Cash invested: $45,500 House hack in a 3/3.5 TownhomeHousehack numbers for FY 2022:Collected a total of $13,700 in rent ($1,141 / month average)PITI + HOA = $1797 / monthUtilities = ~$500 / month avgDeductions for interest, taxes, and repairs = (~$31,000)Tax obligation = $13,700 - $31,000 = (-$17,000) which was taken against ordinary income on top of standard deduction!!

Areas where erosion is present due to emptying gutters (Rear patio, Left Corners) should be filled in to avoid trapping rain water when extension or splash blocks are added.

It will safely increase your cash flow from 7% to 9% and your appreciation from 2.5% to 8%, and reduce your ordinary income tax bill from roughly 15% to 0% over the first five years or so.

They are subject to ordinary income tax rates as they are inventory. 1031 is for property held as an investment such as a rental property.

Property held for less than 12 months is taxed at ordinary income tax rates. 

Mind you he NOW stores his patio furniture, tractor & 'stuff' in my barn & has often borrowed my air tools etc for his truck repairs so I guess it's a wash (& we haven't raised the rent for 2 years).However, the annual pig roast our biker 'rent to own guys' have each year is now a reluctant but automatic decline.

@Larry FlanaganWhen modified adjusted gross income is over $150,000, you can no longer use your real estate losses to offset your ordinary income unless you are a real estate pro as @Natasha Keck mentioned. 

The only real downside I can think of is one is potentially using higher deductions (depreciation can offset ordinary income tax rates) to offset capital gain rates which are generally lower.