You are going to come across as spam to everyone and I would be surprised if you gained much traction.  

My goal in real estate is to own a couple of rental properties to help create passive income.

If I sell it, I'm assuming I have to pay capital gains tax, correct?

We'll blend some pre-1997 depreciated ones with post, always mindful not to sell too much in 1 year, pushing up their cap gain rate.

Why pay taxes on short term gains?

I am in the 25% Fed tax bracketWill there be capital gain taxes at both Fed and state level?

I’m not from Cali so I don’t know the market but in AZ you have to live in a FHA house for 2 years before selling or you get hit with a capital gains tax so do your research on that.

So you’re saying that it’s not an option to sell the property and use the gains to pay off the HELOC?

You want to talk to your CPA first and foremost you don't want to get in a situation were your deemed a dealer and lose your cap gain tax advantages.that said a take down schedule like this is common in the industry.. although CA usually a million dollar property is not a lot.. vis a vi development ground.. and builder developers there usually stroke a check if needed.I suspect though if your going to sell it in phases.the land would be split into 3 phases and you deed out each phase as he pays if off.. but not individual lots that were your CPA can advise you on dealer status.its common though in these scnerios to have accerlated paymentso you have  3 phases  333k each... you sell first phase for  400k.. second phase for 400k last phase for 200k.. this way you get a premium if he fails to buy the rest of the dirtalso in your contract make SURE you demand that all work product engineering soils geo tech that type of stuff is once paid for your property as well.usually in vanilla real estate transaction on the west coast I don't recommend or see the need for a lawyer but in this case I would find a good real estate lawyer tell him these basic terms and things you need then let him prepare the contract.. hope that helps.. and assuming the dirt is in CA.. of course.

@Justin R.Can’t say I’ve had to deal with it personally but gifting or selling a part of a property comes with several implications: how to take title, right of lender to call the loan, right to partition, gift tax, property tax reassessment, capital gains, etc.Also, I’m not sure how accurate that link you attached is with regard to the current law but your 2 bullet summary above seems to leave out some other options.