@Jake Santos don’t have experience renting out but have plenty of expertise from a tax perspective in regards to this.

And their tax advantages go away when you decide to quit and spend the money.

With permit, benefits are 1) get depreciation and other tax write off benefits since it’s a permitted investment purpose ADU, 2) probably better for resell value, 3) have a separate address and don’t have to bother sorting out mails for our legal tenant, etc. without permit; benefits are 1) no hassle to get the permit, 2) no permit fees, 3) no tax on rental income (as it is more like a “roommate”)Has anyone gone through a similar situation before?

I get people calling crying they want to sell their lot they bought for $50,000 and I tell them they're lucky to get resale at $5,000...then of course they don't want to sell....but if they don't sell they're paying $1000 year plus property taxes for a lot that likely won't go up in value for years.So think about your exit strategy. 

Getting title and getting clean title for properties bought at tax auctions are two different things. 

In 2021 we bought the building for $1.5M using private lenders, pushed the occupancy from 50% to 80% occupancy and it appraised for $3.125M, allowing us to pay back the private mortgage.Right now, we are in the predevelopment process of design and piecing together the capital stack for the redevelopment deal, which will be made up of historic tax credit equity, RestoreNY Grant, DRI Grant, etc.

There are several different types of income in the US tax code.Two main types are “active income” and “passive income".Active income is money you earn from working, such as wages from a W-2 job or income from running a business.Passive income is money you earn from investments like real estate, stocks, or rental income from your RE portfolio where you earn $ without actively working.Normally, you can't use passive losses (like losses from real estate investments) to offset active income like your salary from a W-2 job.That is unless you are an RE Pro.The reality is, that Real Estate Pro status is just a filing status similar to filing married or jointly.And if you are a real estate professional you CAN use passive real estate losses to offset active income from other sources.To qualify as an RE Pro you must:1.

We also have pretty high property tax bills (around 2% of the purchase price/property value) that eat into a lot of the rental income. 

Look for properties with low taxes, separate utilities, strong demand, and potential for rent increases.

Several banks offer soft inquiry options, I'd try those out prior to risking the HP.