How will I be taxed?
I am working out a deal right now that should close on tuesday, but I'm already thinking about my future options.... basically option one is to sell the home I fixed up outright and take the cash. Option two is rent the home out for a year and then refinance to get cash out and still own the property. Option #2 seems better but I need some tax advise. I'm confused, if I sell out in under a years time is the profit considered income tax and not capital gains? Therefore being taxed more heavily? If I wait a year and refinance is the money I got out taxable? I shouldn't have to pay a capital gains because I didn't actually sell the property correct? Any advice would be appreciated. Thanks. 
sisayako,
In option #1, you would have a short term capital gain. The tax rate for a short term capital gain is the same as your marginal tax rate on your ordinary income.
In option #2, you are borrowing money with a cash out refinance. Borrowed money is not taxable income because it must be repaid. If, however, you decide to sell the rental property outright after one year instead of doing a refinance, then your profit on the deal is a long term capital gain. Long term capital gains are taxed at lower rates than your other ordinary income.
Thanks for the help, that's what I needed to know.