Mortgage lenders will qualify you for a higher purchase amount for multis than they would on a single, because they will count the rent you will be making on the other units as additional qualifying income for your loan application.

I was in a leased building, counting on a hand-shake deal to buy the property in the future.

If it's net positive, then make sure to do it up to code, etc so the finished square space can count.

I'm not sure if you are planning to buy more, but I think if she becomes an agent then her time looking for properties would also count.

The primary issue is that building small unit in a single count is some of the most expensive development.In addition, in most jurisdictions the primary unit will become rent controlled (assuming more than 15 years old).  

We look at how many counts and how long ago.

The value of the property and how it’s distributed relative to ownership stakes will determine whether it counts as a taxable event, I believe(I’m not a CPA or attorney). 

What you’re counting on is even a slow rate of appreciation, say equal to barely inflation, called it 2-3% being multiplied by 4 or 5X because you only put down 20-25%.

Did the proceeds from the sale count as short term or long term capital gains?

I've painted more walls, ceilings and trim work than I could ever count in my lifetime and *I* suck compared to professional painters, and most of my paint jobs could pass for lower-end professional jobs.