I'm trying to Figure out how to make this potential deal work.Seller wants to sell but not right away because they still use the house for some income. 

If you don't want that, I would sell it or put it into storage (which may not be financially feasible), but long-term renters are hard on furniture that is not theirs. 

@Marie Thomas: Yes, it's like selling pizza by the slice, so both renter & investor get more for less. 

There's a number of them that are selling 3 bed and 2 bed.

I plan to sell my Vegas condo and it looks like I'll be able to make about a 35-40K return.

One was purchased a  few years ago by an out-of-state owner who has decided to sell and has doubled in value.

Question: why would one choose to build an ADU when existing structures sell for less than the cost of development?

With no comps in the area for new construction and the highest rehab selling for 205k, building enough at the onset, 4-6 new construction homes, may be the only way to start a neighborhood turn.The city is looking to increase density in the area and add anchor points in near the area to cater to future investment. 

If you have any equity in the place, then try and sell it. 

Be mindful of recapture tax when selling but consider long-term strategies like a 1031 exchange.This post does not create a CPA-Client relationship.