Having the ability to offset their mortgage with an ADU would be a game changer. 

Give proper legal notice of non-renewal and get them both out.

If you use a DSCR loan you could maximize the equity you could take out while still breaking even on the mortgage + taxes + insurance.

It was bought in 2004 and due to financial issues, I believe ~$197k is still owed on the mortgage.

The mortgage was also raised due to insurance issues to about $1,950… so I am not making much cash flow, more like a cash trickle.

that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases:Class A Properties:Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Vacancy Est: Historically 10%, 5% the more recent norm.Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.Class B Properties:Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 yearsClass C Properties:Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation.

I've been reading more about subject to and here's what I've learned:-Good for sellers who are off market-Have low to no equity-Have a mortgage with a low interest rate (less than 5%)-Be absentee or out of state (vacant property, or have a tenant)The buyer would then take over the mortgage payments, and have the seller sign the deed over to the buyer.

Current comps rent for $2450+ and the mortgage + HOA is $2180. 

There is a safety and follow up piece to have the proper information.

though; (1) there are tenants in the house on a two year lease (payments are enough to cover mortgage payments), and (2) the Seller wants the option to buy back the property in two years.