You would typically sell or refinance at that point.Use a good attorney with experience with these transactions and they would hammer out the details. 

Real estate two types of investments-  income vs. apprecation. for example i am just outside of DC, and most of my investments do not cash flow day 1 but are not way off.

@Greg Heden you will typically not get a very good return on the improvements unless you bought distressed property that needs improvements to be livable.

It's good to use a management company as the will typically have a proven process for raising rents.

So, for example, assumePurchase 80kRehab 20kClosing 5kCarry 10kARV 175kSell commissions/fees 15kWould my taxable profit be 45k (carry costs included) or 55k (carry costs excluded)?

@Amirra Besh If you call any agent, they will typically charge 1 month of rent to find a tenant.Just like in a sales transaction, where the buyer's agent and listing agent split the commission, an agent will offer another agent that brings a tenant 50% of the one-month of rent as commission.Many owners are trying to put pressure on PMCs to lower this fee because they think the monthly management fee should cover at least part, if not all, of this.Here's were penny-pinching owners screw themselves: PMC's will charge lower than the one-month of rent, but they offset it and do NOT tell the owner the negative repercussions!

:Class A Properties:Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Vacancy Est: Historically 10%, 5% the more recent norm.Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.Class B Properties:Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 yearsClass C Properties:Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation.

Basically you can't (or rather the lenders won't) do a cash-out refinance before the seasoning period (6 months typically; I've heard some are pushing 12 months now).

For example, take a fat food franchise.  

Example of one I have when I lived in a different state. bought from a highly distressed seller for 10k cash.