The depreciation you take each year on the rentals (or what is allowed, if you don't take it or take less) reduces you basis and increase the gain when you sell.Even if you're not a RE pro, you can deduct the passive losses against ordinary income if your AGI is under $100K.

But flipping income is usually considered ordinary income and not capital gains if you are in the business of flipping house. 

Also, the taxable portion on the sale qualifies for favorable capital gain treatment.The current maximum federal income tax rate on long-term capital gains is 20% for taxpayers in the highest ordinary income tax bracket.

Zillow has its estimate at $417,000Tax Assessor says $377,000Average $/sqft for a downtown condo is $450 which, using $400 since it's not "downtown," would give an ARV of $645,000.I can't get in the condo, but can see through the patio windows that it needs a full gut and high end rebuild.

I have an enclosed patio that was set up as a bonus room, but not permitted by the previous owner.

That's taxed at your ordinary tax rate. 

Okay, this is an ordinary sale.

If you are already high in ordinary earn income, do you really care about immediate cash flow?  

Also, when you withdraw it is taxed as ordinary income.

I don't recall there being anything out of ordinary when I read through it initially.