I don't work in Connecticut enough to know this answer off-hand but a large majority of states that opt-out of bonus depreciation effectively pretend it doesn't exist.

This policy will provide additional coverage above what your existing policy covers.

You may have a grasp on this aspect, but there are items to consider that can play a big factor when choosing your land such as topography, existing zoning & platted lot status, minimum/maximum requirements such as parking, detention, size of building, setbacks.  

However, the challenge to me is to capture her 3.75% existing mortgage at the same time preserving our cash.

The ONLY advantage is taking over the existing interest rate.

The units won't have HVAC system due to the cooler climate but because of the tightness of the home i.e <3 ACH, I actually need an ERV so I don't kill my tenants due to C02 or VOC poisoning.The problem is ERV filters need to be replaced every 3 months for all 4 or 5 units.

I'm a sole proprietor and am exploring ways to diversify some of my existing retirement funds.

And if it doesn't exist the way we want it, we build it:)

Also know that commercial values are determined by the assets existing performance via their financial statements using the NOI and cap rates, which differs a good bit from how residential real estate is valued using comparable sales.

Best option is likely to buy RE with an already existing detached ADU.