Either way, we aren't reducing our price based on what the appraisal comes in at.

By using existing structure, the cost to add the ADU is reduced.  

Would they just be passive losses that can offset passive income or can we treat them to offset capital gains from other investments ?

You would definitely need to also work on your income or get other people to co-sign on the loan to afford a $850k-$950k home. 

Regarding taxes, I believe LLCs are pass-through entities, and you will just claim the income on your personal tax returns.

One of the many advantages being classified as a “real estate professional “allows you to offset income with real estate “paper losses “ like depreciation and other expenses.

If you sell within 3 years of moving out, you exclude your capital gains(up to $500,000) but you still include as income the amount of accumulated depreciation on the propertyif you sell after 3 years of moving out, you may capital gains and tax on depreciation recapture.best of luck.

Hi, Applicant has good income and job, but ha filed a Bankruptcy in 2015.

The number usually varies from 10-20% depending on credit score, property analysis, etc.Some lenders will work with any level of investor experience, credit scores as low as 660 and can close in as little as 10 days (there are loan options for 640-660 credit scores- they require 20% down).Another good thing is interest only and 6-24 month loan terms- you can refinance by selling or refinancing to a long term DSCR rental property loan at any time once you complete the rehab.Once the property is ready you can sell it or if you want to keep the property as a long term investment, you can underwrite the loan based on your income /debt to income (DTI) ratios or you can go the DSCR route where the loan is underwritten based on the actual or market rents from the appraisal.DSCR loans won't use your income to underwrite the loan.DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.Here's a bit more in detail about how rates are calculated for DSCR loans:1.

I recently purchased a 7 unit with 20% NET income.