A FHA 203k Loan is where the purchase price and rehab costs are rolled into a single loan.The downside of using FHA or a FHA 203k is you will need to live there, for a minimum of one year (to satisfy FHA Requirements); AND because you closed personally, you will not have Asset Protection, in the form of closing in the name of a LLC.

So all of the gain and depreciation recapture are initially still tax deferred.However, like Joe said, the down side is later when sold  you lose the 1031 option. the client will pay tax on all gain and depreciation recaptured from before the 1031 also. 

The 6% is a downside to investing in SC but the appreciation over time in the right areas makes it worth it all.  

There are lots of benefits that come with a closed system than the downside of editing stages. 

As you suggest lowering down payment to buy more properties is one way, although the downside is greater risk in event of down cycle and more time to manage required.  

The downside to having almost unlimited options is narrowing your focus. 

Whether you’re just starting or looking to scale your portfolio, a coaching program can provide valuable guidance—but it’s not without its downsides.

@Caryn Fischer  The downside of gifting or selling property to your children is that it can have capital gains tax consequences.

@Soren AgerThe down side risks, among many, include lack of control, lack of transparency, and reliance on the syndicator’s ability to adequately structure, operate, renovate, lease up, reposition and then exit.

A carryover basis would be a huge downside though compared to a basis step-up if held by parents until death.