The beauty of CA is the lenient ADU laws, the downside is the the entry point to get in. 

I can run the numbers for NOI-depreciation and this holds true, but not all of the operating expenses are deductible (or at least maintenance, vacancy and cap ex aren’t until that money is spent).

If this Cap is allowed to expire, I would think that there will be a rush to take advantage of it.That should increase demand for higher priced Homes because the Standard Deduction gets reduced significantly AND you can go way above the Standard Deduction by Itemizing the SALT Deductions.If your comps are Single Family Homes and/or small Multi-Family that can convert to an Owner Occupied (think BRRRR here), it is well should rise in value as the Federal Tax deduction lowers the monthly payments for every homeowner with a large Mortgage that also pays State and Local Taxes. too funny I had not thought of the Salt deductions in years and today it popped into my mind then you post this.. very true for high priced markets this will be a huge bene

I was analyzing a four plex and realized there are beautiful apartment complexes being built nearby.

The same is true of seller financed transactions.  

But I told him I didn't think that was true. 

Thanks for raising that Evan, it's interesting if true. 

Simply not true.

It’s true that it’s harder to find properties that will cash flow once you move out in higher cost of living areas, but overall returns make that a moot point in my opinion because appreciation is also much higher in these better locations.

Hey man, great report, however the numbers look a little too good to be true.