Having the ability to offset their mortgage with an ADU would be a game changer. 

It was bought in 2004 and due to financial issues, I believe ~$197k is still owed on the mortgage.

Then as soon as the 1031 is complete do a cash out refi, or a second mortgage or LOC on the property. 

Quote from @Chris Seveney: Quote from @Mort McGuire: Good morning to all,Does anyone invest in mortgage notes?

Most often it's in free & clear properties but, in a high enough desire area like these, and with low enough mortgage balance, yup, some can 100% get enough on the sale to have it all make sense because as @Jay Hinrichs has pointed out that in these areas the majority value is in the land not the structures on the land. 

I've been reading more about subject to and here's what I've learned:-Good for sellers who are off market-Have low to no equity-Have a mortgage with a low interest rate (less than 5%)-Be absentee or out of state (vacant property, or have a tenant)The buyer would then take over the mortgage payments, and have the seller sign the deed over to the buyer.

Not sure why anyone would pay to learn how to snowball a mortgage ..  ????

Current comps rent for $2450+ and the mortgage + HOA is $2180. 

I'm trying to get a mortgage, but it's entirely possible that the mortgage might not cover 100% of the price of the house.

though; (1) there are tenants in the house on a two year lease (payments are enough to cover mortgage payments), and (2) the Seller wants the option to buy back the property in two years.