However, the good news is since you've owned the property for over a year it will be considered a long-term capital gain which holds a much lower tax rate than if you owned it for less than a year.  

Just completed the 90 hours of school for real estate and figured this would be a great place to start networking.

@Scott Vaethif your mortgage rate is reasonable i would definitely not use extra cash to pay it down.but give us more info if you want better advice.for example - purchase price, rehab amount, rough new ARV? 

He owes 43K to the bank at a 11% rate of interest. 

Aside from the higher interest rate (I will pay the mortgage), one of the areas I'm looking in charges higher property taxes if it's not a primary residence.

What are the terms (payment amount, interest rate, duration, etc.) of the existing financing?

Hi Chandana, This looks okay, I would say you could definitely get a better rate with 30% down on a DSCR loan.

However, the revenue hasn't matched the growth rate.

Loan to _______________________________________ Balance $____________________________ Interest rate: _________ %, Monthly Payment $___________________ Loan Number _____________ Date last payment made____________________________ Loan current through _________________B.

A way to account for the additional borrowing (or in this case effectively a cash gift towards down payment) is to attribute an interest rate to the $500k (or even an interest free loan over 30 years).