I fear the lawyers will become wealthy over this litigation...Overall, it's an interesting "solution" to the problem of foreign investment in real estate and the lack of adequate housing for the population. 

We had to bring the 1925 house to 2023 code which involved un-installing 26 windows that were already nicely installed (in appearance) in the house, reframing them to 2023 standards (at the time) which also involved strapping the bottom of the wood framing with metal straps (mind you this all after we had already completed the inside renovation).  

I plan to purchase a primary residence, multi-family home (2-5 units, 'house-hack'). 

When did the HELOC on my house with ADU, the first appraiser used option one and I demanded a new appraisal where they would give me a flat value.

Happy to discuss this further on what might make the most sense for your end goal.If you are renting right now and starting your path in real estate investing, as said above, I really do like the house hacking strategy for your situation.

Is it like you sold your house and don’t have to pay for the profit?

Also if you are selling, hopefully your agent has advised you but good practice to have a vacant unit to open the buyer pool to owner-occupied buyers/house hackers.

Usually in the year following your purchase, the property appraiser will reevaluate the house based on the new sales price.  

All new flooring, painting, throughout the house.

Those already exist in mass.