I'm looking at a promising flip in Vermont, but I read that the state of VT charges a cap gains tax.

If appreciation and quick gains is what you want, invest in the here in the bay for sure.

Go here for Texas Education Agency Ratings of School Districts & Campuses. https://tea.texas.gov/2017accountability.aspx Even with these ratings an In'The-Know REALTOR can provide valuable insight.

We as a community tend to let things go because it "isn't worth the hassle" but this attitude is often responsible for the continuation of this kind of behavior and you would be providing a valuable community service. 

For the down payment I can sell stocks and pay cap gains, (which I don't really want to do) or cash out refi our 1) primary or 2) long term rental (or 3) Both).

I want to also help others how to gain and have homeownership once I have a home.  

If so, would we only pay capital gains on the $57K ($180K-$123K)?

I can't lose valuable time by waiting for 100% completion. 

I use a scoring system that helps me get the top application identified, and I concentrate on that one until they prove themselves out or not.My applicants gain points for holding the job for a year or more, lose points if they have held it 3 months or less, gain points for having lived in the community for five years (to me low risk is they have been commuting, but moving to commute often backfires in my area), etc. 

In my case it was a tiny portion at the edge of the property and had little effect on me.Yet another possibility is that this garden and the encroachment has been there for some years and the neighbors may have gained possession of part of the property via adverse possession.