Also, pick a city/location that  is likely to be desirable anyway.

Which would then give me two properties appreciating and earning cash flow compared to the one with the ADU.

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.This example shows that while the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall annual loss.

As the the lines get blurred on who is interpreting the definition of these terms correctly, the desire from the owner to update a property that from the naked eye needs work should be absolutely heard.

After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.Buy four houses with $50,000 down on each.

I don;t understand this: the wholesaler spends his/her hard-earned money to send out postcards/letters to mailing lists and then, if they get a positive response, they don't follow up!  

There may be other ways to structure it, but yes, FHA would require him to qualify on income but if he has not been earning income as a wholesaler for 2+ years and has two years of tax returns to show for it, it is unlikely he would qualify.

It’s warm but not unbearable, and with little to no snow, it’s more desirable for people trying to escape those conditions. 

The rental income you earn should be reported on your tax return, and these expenses can help offset that income. 

While your cash earns interest in a money market account, you could also explore tax-efficient investments in a brokerage account to make your money work harder while preparing for the tax hit.