Use a quitclaim or warranty deed to transfer the title, and be prepared to pay Chicago’s transfer tax, calculated at $7.50 per $1,000 of the property’s fair market value.

Isn't this happening in many markets thought?

One possibility is building a duplex in Peoria, while it's not the best rental market, getting a duplex at a possibly much cheaper price than market value is extremely appealing.

I'm looking to investigate this market a little further and wondering if anyone can help me out.

In your case, changing the property from a rental to your primary residence constitutes a change in use.The depreciation recapture will be calculated based on the fair market value of the building at the time of conversion, not including the land value.Since you're tearing down the existing structure, the entire amount of depreciation taken over the past two years will likely be recaptured, as the building's value at conversion will effectively be zero.The recaptured amount will be taxed as ordinary income, up to a maximum rate of 25% for residential rental property (Section 1250 property).

The guru your son is learning this technique from is likely not telling your son that the deal will almost certainly encourage your son to get an "off-market" deal from a "wholesaler" who is unlikely to properly disclose the details of the property or encourage an inspection. 

Investing in the market that you have knowledge of and the economic factors that support it is necessary. 

Are there wholesalers in your market you can ask if you don't want to talk to a lawyer for some reason?

In housing the house goes up with the market, think comps. 

Then again, curb appeal doesn't matter as much in the inner-city parts of my market - more so in the suburbs.Lastly, if a property is newly built/renovated, 'neutral' may not be the best route.