And I am proposing this as a question to you not as a solution.

DM me your proposals. 

This article talks about the area being saturated with STR'S and city council looking to double the lodging tax.https://pagevalleynews.com/lodging-owners-speak-out-against-proposed-doubling-of-lodging-tax/

We have been proposed a deal where we would renovate the sellers duplex from a 2 to a 4 and while doing that, our sweat equity would earn our down payment To purchase the property through them.

You can even finance the 6 months of pitia mortgage payments into your proposed loan that way you’re not making payments for two residences at the same Time

He proposed 2% which would be $8,000, does this seem fair or standard?

Divide the $100k cash out over 15 year proposed mortgage = $6666/year.

Without knowing more details about the specifics of the project being proposed as it relates to your property, it's hard to say if there are any obvious big red flags that could negatively impact your property's future value.That being said, I would try to find out as much information as possible about the new apartment building's design and layout - the two big things I would try to ascertain would be the location of the garage entrances/exits, as well as the location of any outdoor amenity spaces (pools, terraces, dog runs, etc).  

They may also not account for finishes, or budget appropriately for required permits.Try googling "Comparing Quotes and Proposals from Different ADU Builders" for a full list of what to look for (I can't link here because it's my own article).

One of the latest is a law that proposes all tenants can have a pet with no additional costs.