Due to item 1, adding an ADU can require years to start achieving any return (once the accumulated cash flow recovers the initial negative position).4) Adding an ADU is a slow process.

Upon move out and receiving a portion of the security deposit, we were charged an over $400 cleaning fee in addition to some normal wear and tear items because they exceeded the apartments self calculated normal wear and tear allowance.

Many of them will actually let you buy the warranty after the item fails.

These action items are far more important than entity formation but get ignored. 

Bonus depreciation is just a special part of the US tax code.It allows you to take accelerated depreciation on portions of your property depending on when an asset is put into service.At the time of this writing, you can write off a huge portion (60% in 2024) of many qualified components that have a useful lifespan of 15 years or less.That means a certain percentage of things like landscaping, sidewalks, latches, appliances, fences, certain flooring, etc is depreciable in year 1.The bonus depreciation rate percentage changes yearly depending on the administration and the tax code.For years 2015 through 2017 first-year depreciation for all the items on a 15-year schedule or less was set to 50%.It was scheduled to go down to 40% in 2018 and 30% in 2019 and then 0% in 2020.But then Trump got elected, and he enacted the Tax Cuts and Jobs Act.That moved the bonus depreciation percentage to 100% from 2017 to 2022.In 2023 it went down to 80% and it’s currently at 60%.Depending on who gets elected again, 100% may be back on the table.Only time will tell.We know that the US government wants to incentivize more development and ownership of RE.They want Americans to continue to build and maintain our physical world.That’s why real estate is one of the most tax-advantaged assets in the US.Depreciation and bonus depreciation for RE are very positive and will likely continue in the years ahead.

If there are issues with these items are these major red flags?

Deposit AmountThose are the 4 items you have to play with that do the negotiating. 

You should be calculating Cap Ex for all long term items that will need replacement at some point - appliances, roofs, ac, water heater, etc.

Build it into your model of start-up costs, down payment, or other initial costs of the purchase. 

The other is end of service life items such as the roof that would have to be capitalized aka Depreciated rather than written off as an expense immediately.