Even adjusting the expenses and make them higher (~50-60% rental), some opportunities still seem decent, especially if one allocates a smaller portion of his/her portfolio, for diversification so to speak.Thanks

Ultimately there will always be a qualified use allocation since it began life as a business asset. 

Here're my two problems with this recommendation:1) I think re-allocation is important to any investor, including a buy and hold, which means that it's better to treat each property as its own entity.

It should make common sense, as you're allocating as of that date.

Just know what your numbers are so that you know if the contractor comes back with a bid you can have a general idea if that will work for your rehab budget allocation or not. 

My belief is that real estate will provide superior returns to other asset classes so I choose to allocate my funds there.

We’ve had several good referrals but I see where our focus needs to be better allocated.

I would go in, inspect what the progress had made and take a percentage of the baseline SOW number allocated to that activity.

In the scenario you are talking about you would get to take up to the $500K of gain tax free (if married) from the allocated % of the property that you used as your primary residence. 

@Mike Wood  on the west coast you can throw % of project allocated to the land right out the window.. its inverse in many areas.For instance I paid 750k for a lot in Palo Alto 6 sq ft tear down in Barron Park  and spent 400k building the home.