It's important in RE to view both sides of the transaction's perspective.  

From a cost perspective, do also keep in mind that it may be worth it to pay a few extra bucks for someone you're looking to build a long-term relationship with if you really think you are a good match with them.

Positives from an investor's perspective:- Leverage and Appreciation: By opting for a 20% down payment, I'm leveraging my capital.

That's why I suggest asking the question from the perspective of why it's being treated like a sale vs. asking about the consequences of the transfer...and maybe the posters State is part of the answer.Obviously there are many personal facts not included here any one of which could be the "aha" moment for understanding what is going on.

Basically will they value it as a multifamily property (5+ units) using NOI and cap rate or will the quad be valued from a residential (comp-based perspective).

Thanks, but my question was from the perspective of having these reserves counted as deductible expenses (since is prudent to keep them available) and lowering the tax footprint, as mentioned by @John Clark.But since you mentioned how to calculate them, this how we do it - I have a google spreadsheet that tracks all the times, with their considered lifetime expectancy and the date the item was placed in service.

- If you and your friend are aligned from a value perspective- then yes it makes sense to go into business with a friend. 

From my perspective, working with a company that will do all the registering and serve as registered agent isn't very time consuming.

Many times I discover the highest and best use doesn't align with my investment strategy or doesn't make sense from a profit perspective given what the seller is asking. 

I've been toying with the idea of scrapping the building and starting fresh, creating a six-story building with at least six units, one per floor to rent out.