In CA (my market) the seller is required to make honest disclosure statement and you can collect for material non-disclosure.I suspect you already have learned that you need to check the status of all permits. 

How are you coming up with that much larger market rent for all those units?

Hey @Paul LaValley welcome to the forums, and phoenix and Tucson are great markets, what makes you interested in those markets specifically?

The issue is building a single small residential unit is some of the most expensive development.Here is a list of why adding a single ADU in single family zoned areas in my CA market is typically a poor RE investment:1) The value added by the ADU addition is often significantly less than the cost of adding the ADU.

I'm interested in doing more HUD-VASH deals, and Sacramento is a market I’ve been exploring.

Im not familiar with your specific market but if you have not checked out the events section I would start there. 

Many investments that seem to promise higher than market returns do so because of higher than market risk.

🏙️✨ This 12-acre, multi-phase project is set to introduce:✅ Luxury Living – A 383-unit apartment community & boutique hotel✅ Business & Retail Hub – Over 400,000 sq. ft. of office space & a variety of restaurants, shops, and fitness studios✅ Pedestrian-Friendly Spaces – Green areas, public art, and a vibrant "main street" atmosphere✅ Historic Charm Meets Modern Growth – Two historic brick mill buildings will be seamlessly integrated into the design🏡 Market Insights:📈 Avg.

🏙️✨ This 12-acre, multi-phase project is set to introduce:✅ Luxury Living – A 383-unit apartment community & boutique hotel✅ Business & Retail Hub – Over 400,000 sq. ft. of office space & a variety of restaurants, shops, and fitness studios✅ Pedestrian-Friendly Spaces – Green areas, public art, and a vibrant "main street" atmosphere✅ Historic Charm Meets Modern Growth – Two historic brick mill buildings will be seamlessly integrated into the design🏡 Market Insights:📈 Avg.

You need the backup option in case the mid-term rental market changes.Minimizing turn costs and downtime is critical.