It is amazing how many times I have seen the cash flow represented as rent - PITI and to compound the issue they did not realize the ADU would increase their property tax.   

For example, what is the monthly revenue for the property and what are the "All In" expenses, including mortgage, taxes, insurance, utilities, repairs, etc...

The 1031 exchange will indefinitely defer all tax on profit and all depreciation recapture.

Britt,My firm has evaluated some smaller properties (under $500k) in the past for cost segregation, and it generally does not cost justify moving forward, since the benefits are small, and typically the tax liability on the income is minimal if any.

Still ended up being great due to the location.

I pay $875 (including principal, interest, taxes, and insurance) and rent it out for $1,625.

It's easier to scale with multifamily properties due to income potential and operations.

I know pools are a must have amenity to compete in many markets and I have to admit that I'm a bit hesitant to enter those markets due to the potential liability risk.

If the purchase is done in cash, as you mentioned, they’d have more flexibility, but they’ll still want to carefully consider the tax and legal implications of the subsequent sales.I hope this helps, and good luck with your client’s deal!

I chose to invest in 1272 Lakins Rd, Etna, due to its potential in a growing market.