You have to adjust your expectations to match current reality, which includes higher mortgage rates, higher prices, more expensive taxes and insurance, more competition, etc.

You will have to gather more accurate operating costs (vacancy loss, taxes, utilities, insurance, mgmt fees, maintenance, HOA) to best determine potential future performance.

That would be like claiming people should ignore speed limit signs because they don't advertise the road, traffic or weather conditions.

Rent Per Unit $‎650 $‎700 Other Income $‎750 $‎800 Less Vacancy $‎(3,120) $‎(3,360) Operating Expenses $‎18,790 $‎19,809 Repairs $‎4,000 $‎4,200 Capital Expenses $‎2,000 $‎2,100 Landscaping $‎1,500 $‎1,575 Utilities Vacant Units $‎288 $‎302 Property Taxes $‎6,000 $‎6,300 Insurance $‎1,500 $‎1,575 Management $‎3,002 $‎3,232 Other $‎500 $‎525 Net Operating Income $‎41,241 $‎44,831 Financing Expenses $‎22,224 $‎22,224 Cashflow $‎19,017 $‎22,607 Down Payment $‎21,000 $‎21,000 Cash on Cash Return 90.55% 107.65% Keep in mind, this return doesn't even include the principle pay down on the loans.

Because the legislature has passed protections for unpermitted units, a tenant should not be able to make any claim if it is a safe unpermitted unit.i agree with your sentiment on getting the ADU permitted, but not for the reasons you stated.  

Brandon Turner's Rental Property Investing book is an excellent primer to understanding the happy path for purchasing a property - however in this market it really comes down to having bulletproof assumptions on rents/taxes/R&M/etc. as with rates as high as they are/inventory as low as it is, there is less cushion in your returns if you analyze properties with bad assumptions.

It seems like every city, county, and state has its own rules, permits, and tax requirements for short-term rentals, and I’m finding it overwhelming to navigate all the different layers of compliance.For example, some places require business licenses, transient occupancy tax permits, or even special zoning approvals.

In order to defer all of the tax you must purchase a replacement property that is at least as much or greater than what you are selling for.

I prioritize appreciation, tax benefits (rental property expenses, depreciation), ability to use leverage, and passing on generational wealth with real estate. 

Also, the tax benefits of the buy and holds help offset the increased tax consequences of fix and flips.