The ADU / MIL distinction is important for your rehab costs too, as an ADU will require a full 8-12 week permit review, and require separate heat, a separate electrical panel, and a separate hot water heater.

your right Mark about the FSM rekey as opposed to the AM..I sometimes forget there's distinction between the two - also, I didn't think they did re appraisals unless it had been more than 3 months since the previous appraisal... but I'll be the first to admit I don't everything about the program - I am still learning about HUD home sales and they usually sell so fast here in Fresno that there is never a re appraisal.

An investor that just holds rental property for the production of rental income is probably not engaged in a trade or business and would not qualify for some of the business deductions.There are special nonbusiness deductions allowed for investors that hold rental property.When discussing possible tax deductions it is important to keep this distinction in mind.

But here's the important distinction: under my scenario, the author in year 10 would make $110k in cash flow and cash reserves would be higher than in year 9 by $10k. 

Any future lender will look at it as two properties because they are legally distinct properties.

Thank you for the distinction.

@Kathi Miller there's a lot of posts on the BiggerPockets forums that are not accurate around the service animal vs emotional support animal distinction, in some cases due to discrepancies in state-state laws and/or misinterpretation of ADA guidelines in this area. 

Yeah, I remember when I was looking there for a property for my family, this was 2012, maybe it is different now ... anyhow, I remember distinctly it was an old historic home ... ironically it just sold again (zillow 324 W 10th st) ... the property was beat up but beautiful, which pretty much matched the description of most of the block.

In my mind, that comes in two flavors - either you have a larger capital cushion (by having a lot more capital) OR you have a mentor who's really invested in walking you through the process.

It’s a single family home with 3 distinct entrances.