Gifting the property to your son transfers your basis ($265K) to him, allowing him to sell at his lower tax rate (0%-12%), but requires using part of your lifetime gift tax exclusion.

Time the Sale Strategically: Selling the property in a year when your income is lower can place you in a lower capital gains tax bracket, reducing the tax rate on your gains.8.

These include the actual cash flow (NOI), Your net cash coming in after expenses and allowancesDepreciation - the tax benefit that lowers your taxes. 

Accreditation today has a seemingly lower bar than it was, say, ten years ago due to inflation.

This typically means lower down payments and better interest rates compared to traditional investment loans.

In San Jose I think that lowers the school fees cost/taxes etc.

When your rehab is done, hopefully those rates are lower!

If the answer to both added questions would be "yes", then you have a potential goldmine here.Combining the seller's concerns, and the reality of a big down payment being a negative to the seller (see Q: 1), you should be able to set the terms, with a lower DP, and controlled interest rate, to have this property CF and,...be able to sell the package to another REI down the road,...as long as you buy this using an LLC (a new one). 

As for a downward shift you can always lower your rate (underwrite a worst, middle and best case scenario), Make sure your rental stands out from the crowd (easy to do in Hawaii since most owners don't reinvest in their property).  

But look out, lower cost management companies make it back through add-on fees, so scrutinize that agreement carefully.