And he said he would give me my deposit back to dissolve the contract , get the money from the insurance and spend it.

Is it legal in all 50 states to take a pet deposit for a service dog?

Should be a section that explains EM and the deposit instructions... 

Your real life returns will more closely match your on paper returns in better areas.

Can we slow down the depreciation in the first 5 yrs to match closer to the cash flow deliver to optimize annual taxes on the this deal while reducing the recapture that will occur if sold within 5yrs?

Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5.

Two homes on one property is a "two unit property," not treated differently than a duplex.Correct, not a model match for super beat up real estate. 

But I don't think it is very retro to match the cabinets.

You can contribute each year to match your earnings up to the limit( depends on account type and IRS limits for the year) at brokerage or bank IRA and invest in investments you feel comfortable with like stocks, bonds, mutual funds and cd's. 

Take a look at the comps on the appraisal and do they closely match the home you want to purchase.