This might make sense, but again, you are just deferring the taxes and now pushing tax from capital gains to ordinary income. 

If you think ahead, you can minimize recapture with the right tax planning.So what is recapture?

I am told that they did not have closets as they used to be taxed on rooms that had closets.  

As I stated above, please exercise caution and make sure fully executed documents are received prior to wiring funds.

Let's assume your expenses (mortgage, taxes, insurance, maintenance, vacancy, etc.) comes to a clean $600 and the property rents for $1,000.

Many experienced investors are humming a long similar to prior to the rate hikes.  

Was able to gain some leverage prior to negotiating which resulting in a great outcome What was the outcome?

The sellers you are dealing with in these situations don't deal with prorating Taxes, or any other kind of prorations, that is what an escrow agent does. 

Be sure to hold a hefty reserve to handle on-going maintenance, capex, taxes, and insurance.

Assuming this is an 8 cap neighborhood you'd have a ~$420-450k value within a year (unless property taxes are crazy high) when leases would renew since it'd be valued as a commercial building with the office space.