Looking back, I probably could've added average sale price in the area.

Thus, you will have a higher profit margin.You will have added closing and holding costs when paying with Hard Money.

While they do eat into rental margins the larger profit came from the sale and the added rental profit was not worth the hassle of being a landlord.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

I have not added all the details to this deal to give the full background.

There are instances where added depreciation expense will not result in a larger refund.

However, once you start renting it out, those renovation expenses could be added to your cost basis, potentially lowering capital gains taxes when you sell.

Also, have you made any significant alterations to the property or if it were put on the market today, would it be indistinguishable from a standard 4-bedoom house (are there any extra walls for the SRO, constructed locks/barriers etc.)If its a standard SFR and the leases are very short term - there is a path that you could refinance this with a DSCR as basically a Short Term Rental and then potentially change strategic course back to SRO if needed at a later date

Let your STR start making money before adding cost in replacing the flooring.  

This is only one of the challenges of adding ADUs.