Increasing rents too fast can 'push' renters out and then you have dark months and expenses which can take years to make up.So what I'm saying is don't go into a deal feeling like you can renegotiate the circumstances with the tenant.

In that circumstance, where its a slummed out completely illegal additional apartment, you will most certainly be F'd.

@Ben Pohle for this specific circumstance, my girlfriend's brother in law is involved with the city council.  

When I'm "Driving For Dollars" I see houses that are neglected and in really bad shape but it's obvious that somebody is still living in that mess.

The IRS generally looks at intent as well as actual facts and circumstances of each transaction.TL;dr - holding something for a year and a day will not necessarily make it capital gains.

Nice properties are greatly valued over neglected properties. 

Only 3 out of 100 have life circumstances that make them super motivated and they want to sell fast and for a discount.

What circumstances could arise to prevent me from selling it right away.

Now if the market is rising in value the bank might be slow to do anything as they likely get  a higher price by waiting.Each property and circumstance is situational.

There's so many variables and complexities to taxes that make it difficult to obtain appropriate guidance for your specific circumstances from this forum, or any forum for that matter.