I also would like to reduce the audit risk due to large bonus depreciation. 

Other than the additional transaction costs, I would think it's a solid play overall for higher risk deals.Very interesting discussion. from my knowledge and then advice.. if the borrower signs the dil at closing they have already transfered it back.. it does not need to be recorded to be valid its valid the date its signed so there is that..

Please feel free to contact me if I may be helpful to you.

I personally learned I enjoy local investing in residential properties.

You subject yourself to a lot of risk on DIY.   

While other banks will allow 10 on credit and then allow you to switch to a DSCR or actual portfolio loan to free up credit.

The calculation involves:Selling Price: $1,075,000Original Purchase Price: $355,000Depreciation Recapture: $105,300 (taxed at 25%)Capital Gains: Sale price minus original cost, minus depreciation, minus selling costs (~15-20% federal capital gains rate for their income bracket).State Taxes: Since the property is in California, state capital gains taxes will also apply.Given the multiple layers, I’d highly recommend your parents work with both a CPA experienced in real estate and a qualified intermediary for the 1031 if they choose that route.If you need recommendations for professionals in Illinois or California, feel free to ask!

Offer discounts for applying in a short time period or- offer a free application fee. 

Because the laws are so tenant protection oriented I would rather have an empty unit than take a risk on an uncertain situation. 

It’s a lower-risk way to get your feet wet while you’re learning.