If you are going to owner-occupy usually you can do less down.

Any property that is not fully occupied is inherently more difficult to finance.

I am not a CPA, so be sure to speak with yours...but to your main question:  yes, she will have to pay capital gains taxes on any gains since she has not occupied the property in the last 5 years. 

Hi BP - I'm trying to purchase a 4-plex in Sacramento, CA that I can either use as a primary residence (owner occupy one of the units) or as an investment. 

In the past I didn't allow dogs but I bought a small portfolio and literally all the occupied units have dogs and so I would be more likely to admit a dog at that place but not at my other dogless MF properties.

You’ll be 99% occupied Mid March thru Labor Day and 25% after that unless you can get some snow birds to rent it.Depends on how close to the beach, how many can you sleep in the 4 bedroom, and do you have a private pool?

I've never had to worry about two families occupying the same space.

I had originally planned to purchase a 4plex and owner occupy so I can use an FHA loan and only put 3.5% down, but since I've been analyzing properties (thank you BP!)

(This is about taxes)You need a Zoning Permit for Visitor Accommodation:To rent your home for stays of 30 days or fewer.If the property is not your primary residence.Housing requirementsSmoke alarms must be installed:In each bedroom.In the hallway in the immediate vicinity of the bedrooms.On each floor of the home, including basements.Carbon monoxide alarms must be installed:Within 15 ft. of the entrance to every bedroom or within 15 ft. of a bed in sleeping areas if there isn’t an enclosed bedroom.Centrally on a wall or the ceiling, but not directly in front of a door to a bathroom or within 5 ft. of a cooking appliance.Under the installation requirements for smoke alarms if they are combination smoke and carbon monoxide alarms.You can’t post signs for lodging on your home.The home can’t be occupied by more than three people (including the owner and renters) who aren’t related by blood, marriage, life partnership, adoption, or foster-child status.You cannot change your house so that it no longer resembles a private residence.Information you must provide your rentersRenters are only allowed to have guests between the hours of 8 a.m. and midnight.You must tell renters the trash and recycling collection days and any trash disposal rules and regulations.

I think the best approach here is to let them have it, the goodwill will be worth way more than the dirt- the intent is for my daughter & roommates to occupy the house for a few years, then I will decide on keep or sell.