Rehab costs, taxes, and interest during this phase increase the depreciable basis, providing long-term tax benefits.

Also the school districts have been increasing property taxes in A LOT of investment properties thus eating some of our profits. 

Seller is the Agent.Seller bought property in January of 2023 for $730,000Current “As Is” Value : $770,000Target Acquisition Price: $730,000-$780,000 After Repaired Value: $900,000Repair Estimate: $120,000Initial Offer Amount: $715,000Loan Program: Bank Statement Program.Total Estimated Monthly Payments (Principal, Interest, Taxes, and Insurance) $5500/month (based on $770k purchase price)Estimated Gross Yearly Income from Short Term Rental: $160,000 (65% Occupancy, $700 a night| (STR Listing Comparable properties Listing 1 Listing 2 Listing 3)Net Monthly Income after management and taxes: $11,751.25Net Monthly Income after Mortgage Payments: $6251.25 ($75,015) Per YearTotal Cash Investment: $297,000 ($177,000 in down payment and closing costs and $120,000 in repairs)Average Yearly Return on Investment: 25% yearlyAverage increase in property value per year: 5%Average increase in booking revenue per year 7.5%Property Value average after 10 years: $1.5 millionTotal Cash received over 10 years: $1.3 million.Total Equity multiple min over 10 years: 6x total return on $297,000 invested.

In 2024, I noticed an increase in BP leads that have been high net worth investors reaching out wanting to 1031 into bigger properties.

I'm not sure by how much your rates are increasing but I have friends in NOLA who have seen a 2x increase per year.

So spending 200k on an ADU will likely not increase your property value by 200k. 

In Portland for example we are not allowed to increase rent more than once in 12 months, and it must be less than 10% increase in "effective rent".

However, by placing money in a property that I would like to have in order to increase my quality of life, that can also produce some cash flow instead of being a liability that requires money every month, I can increase my quality of life without increasing my monthly liabilities.  

How do you see this coverage increasing as he scales?

Over time, rents may increase, improving your cash flow, and you’ll gain equity and valuable experience managing tenants and property operations.