Don't forget the cost segregation on the SRT portion to save you taxes.This post does not create a CPA-Client relationship.

It seems like you are making money in you job, as it seems like you've saved $200,000 (50% of $400,000.)

Consider strategies like maximizing depreciation (e.g., cost segregation studies), carrying forward 2024 losses, and accelerating deductible expenses to reduce taxable income.Shift to Passive Investments: If management has become burdensome, hire a property manager or transition equity into more passive assets like turnkey properties, syndications, or REITs to reduce workload while maintaining income potential.Expand or Reinvest: Use your equity to acquire new cash flow-positive properties in markets with strong fundamentals, focusing on diversification and long-term stability.By refinancing, selling underperformers, or paying down debt, you can improve liquidity and cash flow.

Paying my commission or even just getting a $500 appraisal would have saved him $500k.

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No down payment means you invest for nothing, take advantage of principal paydown and tax advantages and maximize your BAH to do so.

As the owner, you should also be more flexible about how nice the basement is - saving you rehab costs. 

The thing is he wants to sell it directly to me (FSBO) without the use of an agent to save on commissions.

I recently bought a house with an "illegal" apartment in Jersey City, and I am wondering if we can move in there ourselves to save money.

If you don't have savings to get more property, the leverage would only increase and the risk so why risk something when you are creating a strong foundation?