You do run a "risk" of being outbid at REO sale and "losing" the property, but given that may happen, the "total debt" is your security as you may bid up to that amount where it makes sense, but you may also be able to cash out for a healthy profit at sale if you so choose.

You missed an important item: Depending on how a person does #1 or #2, it could get them: A fast-pass to the "Principles Office" for "bullying" and now there sitting in "detention".... 

I am looking at 1031 possibly or just fixed refi/or use my heloc for the time being on a value add for a building 10-40 units (market dependent on price). 

If you choose not to rebuild/replace your settlement would usually be for actual cash value.It's unlikely you can get a settlement for above the coverage amount you paid for.

You find the numbers, and strategies that work in any specific market you choose, then wait until a property pops up that meats that criteria, and jump on it."

**Selecting Properties**: When choosing a property for Section 8, focus on neighborhoods with strong rental demand.

The specifics usually depend on agreements with the tribal government.

There is a not so inexpensive fee - anywhere from 5k to 100k depending on the program and they take a % of each deal. 

Question: why would one choose to build an ADU when existing structures sell for less than the cost of development?

Hey David, the best metrics depend on your investment goals, risk tolerance, and market conditions.