It is about disclosing the scope of the rehab.  

The Annual Owner Statement should break down all the expenses that the owner's tax professional then figures out how to deduct and on what tax schedule.So that way the owner can expense everything throughout the year?   

Without control in the deal, you’re at the mercy of both the lender and the seller, which is not a good place to begin in real estate investing.Because you’re not putting any of your own money into the deal, neither the lender nor the seller has much incentive to be flexible if problems arise. 

@Daria B. it sounds like you were the seller, you have the credit, and you did a 1031.

For FHA loans with less than 10% down, the monthly MI is permanent - it lasts the life of the loan, no matter the LTV down the road.

If not, they may consider building the ADU and down-sizing into it and renting out the main house.

Recapture typically happens only when you sell the property.If you use the property partly for personal use and partly as a rental in a given year, depreciation and other expenses must be prorated based on the number of days it was rented versus personal useBased on the current tax laws and regulations, once you've taken bonus depreciation on an asset, you cannot "capture" additional bonus depreciation on that same asset in future years, even if the rates increase.In the 2024 tax year, the rate for bonus depreciation is 60%.

Despite the house being operated for years by the prior owner as a STR. 

You will realize the loss for tax purposes when you sell the security, which it sounds like will happen in 2025.

I have a few thoughts on the above neighborhoods...