There are loopholes in tax laws but the entire system isn't a loophole.Again, here is the definition - Loophole- A way of avoiding or escaping a cost or legal burden that would otherwise apply by means of an omission or ambiguity in the wording of a contract or law.

That said, it's certainly impacting my project in numerous ways and I will have legal expenses. 

I would rent out the Nevada property then later on, leave the Bay Area and move into the Nevada home to semi-retire (work on a part-time/contract basis) - there's no state income tax whereas California is taxing all my income, including rental income from my Indianapolis properties.

I'd imagine having a roommate who also gains equity would turn into a legal nightmare when either of us decide to move. 

Also about to finish my first flip, it’s under contract. 

When I started asking specific and perhaps challenging questions about the contract, the sales people disappeared. 

Over time especially here in the Midwest with the expansion (summer) and contraction (winter) we get, things move including houses. 

Speak to the Hoa and review the HoA docs before going under contract.

Im looking at a property that has two legal units and a third that is not.

You can sue but you u are gonna spend just as much on legal going after the wholesaler or owner and most likely they have no money anyways so you are chasing a ghost.Unfortunately this happens and this is why you should also follow your checklist and not take shortcuts when buying a property