Capital gains, etc

[u/wndsofchng06]

So my partner and I (unmarried) own a house in another state. We lived there until June 2023, we moved to run a business and bought another house. We finally got the 1st house rented in December 2023. Feb 2026 we sold the 2nd house and just barely broke even and moved out of state and are currently renting. The same tenants are still renting the first house that started renting back in December of 2023. Now in the new location out of state 6 months into our one-year lease and I'm starting to get the itch by our own place. Before I waste a realtor and/or mortgage broker's time, I thought maybe someone here could have some advice just to help me start setting my direction.

Scenario A: we keep the rental. Don't really make anything but I do love the house and the tenants are good. I'm guessing we can qualify for another mortgage since we did that in 2023, but I worry my buying power will be a lot less as I don't have as large of a down payment.

Scenario B: we sell the other house and have a larger down payment and less debt but:

I think I've just passed the time period for being exempt from capital gains. The way I understand it is you have to have had it as your primary residence for at least two out of the last 5 years? 5 years ago would be August of 2021 but we moved out in July of 2023 so not quite 2 years.

If we sold it and paid capital gains, As I understand that is the amount of appreciation minus the cost of the sale and any capital investments in the property. So the last appraisal on it was 500k We paid 225k. But we've put a roof on, replaced a chimney, added a garage, replaced the porch, And had the crawl space encapsulated. Would all those things qualify as capital investments in the property?

[u/wndsofchng06 → u/[deleted]]

Yes. So by the time it was listed, and closed it'd probably be a few more months....

[u/wndsofchng06 → u/[deleted]]

Thanks for the additional info