For example, if you purchase a $500k legal balance (unpaid principal + accrued interest/fees) for $200k, then rehab and sell the property for $300k, can you write off the uncollected $200k (the $500k - $300k difference i.e. not pay taxes on your profits, as on paper as the lender, it is a "loss")?

That is pretty interesting and slightly discouraging on the ADU front as it would make a property difficult to buy and hold unless you wanted to live in one of the residences for a long period of time. 

We're looking for areas with the right balance between appreciation potential and rental rates. 

I then take that 400K and pay off (or just pay down) 4 separate properties that each had a 100K balance on them.

Is it difficult to get city hookups?

The owner dont care about the equity on it, his goal is to clear out the loan balance.

Howdy @Bob FaulkYou are going to find it difficult to achieve 2% for Income-Expense Ratio on a BRRRR deal. 

As @Dennis M. said, Dodd Frank has made it more difficult.

Is it more difficult to be approved for commercial financing?

There aren't many investment vehicles in a TSP aside from the funds the few funds they have.Would it be possible or even legal (I know, seek professional legal advice yada yada) to continue contributing 5% (or more) into my TSP to take advantage of the "free money" being matched by the government and then roll the balance every year into a tax deferred SD-IRA so I can invest that money freely?