However, I feel like the revenue has been great even though we bought it “for them” it could be a great long term play by keeping it and having them live elsewhere.  

But that’s how I would expect it to play out. 

Thats going to play a big role in your options i think

Essentials include pack ’n plays, high chairs, safety gates, and easy-clean surfaces (no white sofas!).

I'm also finding that a single large repair can wipe out a whole year of income, making me wonder if cheaper cashflowing properties is the right play. 

You’ll either need to focus on high-cash-flow opportunities or equity-building plays (forced appreciation in value-add properties.

Real estate is one of the most powerful wealth-building vehicles—but only if you know how to play the game. 

The Private Equity and Institutional investor is playing the ADU game - I’m working with them.

Under Alabama law, that is a VERY dangerous play and you could end by losing money.You also cannot sit back and let him build the house and say "Thanks."

@Marko BukvaI'm not entirely clear on the plan and ownership, but there are potentially several different types of tax at play for a transaction like you're discussing - gift taxes, estate tax, income tax, property tax, documentary transfer tax, etc.