If you are looking to capitalize on the market, and DTI is not an issue, price reductions are a better alternative, since you can always refinance into a lower interest rate.  

If she sells the property before that date, she would not qualify for the full exclusion unless she meets certain exceptions such as unforeseen circumstances like job loss, health issues, or other qualifying reasons outlined in IRS Publication 523.Regarding prorating the exclusion, unfortunately, there's no provision in the tax code for prorating the exclusion based on partial years of ownership or residence.

The biggest issue was having far below market rents when I purchased.

The ones that don't are usually more investment-related and probably wouldn't issue credit cards anyway.

But I would suggest that most of these “programs” put together by the notorious real estate marketing companies located in Salt Lake City, or Las Vegas are well vetted by legal council and do not commit legal fraud on its face.  

I also like that these newer homes attract quality tenants, I may be lucky but haven't had any issues with any of my tenants in these types of homes (yet).How did you find this deal and how did you negotiate it?

Otherwise, you might end up spending more in attorney fees trying to fight this issue.

How would I go about the process of converting this detached garage/storage area into a legal and permitted ADU?

A contractor can't see some issues if the services aren't turned on.

The issue that people keep ignoring is our uncontrolled spending and debt.