The current tenant was already in place when I purchased the building, and their lease is set to expire in a few months.

You want to build a relationship.  

Encourage him to build credit to 680/700+, get 20% down, and have 9-12 months reserves and then he can get a No Income loan from one two different lenders. 

The lessons you learned the hard way in 2008 will be invaluable now, and it’s great that you’re aiming to stay small-scale and within your comfort zone of Sacramento, which gives you an advantage of knowledge in that market.Given your experience, I'd say start by focusing on three key areas to build confidence and minimize risks:Budget Control: Over-renovating was one of the big mistakes you mentioned.

But keep in mind if your using money you cant afford to get back then buying action property might not be appropriate for your current endeavors and its better to just buy open market were you can do proper due diligence and know you have a build-able site.

Anyone who managed to do this probably did it 5+ years ago when the market was very, very different.If you borrow $200,000 to build an ADU, I suspect you would need to rent it for $5,000 or more to make the numbers work.

As those prices fluctuate, there is a builders somewhere putting his feet up waiting to see a market turn more active because the last thing he wants to do is start paying crews to build houses, that could drop in value while he's halfway through the build process and losing equity halfway into the project.

Everything in the article makes total sense...wealth building helps through appreciation and debt paydown over time.It makes sense that chicago suburbs with strong school districts perform the best. 

Yes we ask towards the top of the market, but I anticipate my holding times (which are in line as the short supply in my area is able to work for me) and build that in. 

Personally, I’ve been looking for ways to align creativity with the numbers, whether that’s finding undervalued properties, building relationships with local agents, or pivoting to new strategies.