Deferred maint. related to the preservation of the property also need to be done. 

That has no bearing on the tenant/buyer, nor does the fact the owner is selling to the tenant affect his or her ability to use a 1031 to defer taxes on the gain.Once the current tenant buys the place they must live there for at least two years before they can take advantage of the exclusion on gains on the sale of a primary residence. 

As long as you purchase at least as much as you sell and use all of the proceeds in the process you will defer all tax and can purchase multiple replacements. 

If there is any deferred maintenance that the inspection doesnt catch (and in my experience, the inspection is next to worthless and they cant be held liable) then its going to be even worse. 

Those amounts are up to you, and the "pref" should be deferred, so it will also be paid when you sell the project, just like the profit participation portion. 

Joan Brazie If your net sales price is 480k then you’d have to purchase a property that price or higher to complete a 100% tax deferred exchange.

This is fairly easy to do and will give you an exact number to work with.You'd need to confirm whether or not there has been any deferred maintenance.

And sometimes, they are lower than expected and you come out ahead (or at least get to defer the pain)! 

As best we can tell, there was never a lease, or it expired about 18 years ago.Lots of deferred maintenance on the house (e.g., needs new roof, and just found out from the tenant that the electrical heater -- not sure if this is furnace, or space heaters -- haven't worked for a while, so they've been using a gas heater).

And if you decide to live in a 5+ units building here, you'll probably be sharing space with some grumpy neighbors who will make you miserable, considering they've probably been living for many years in a deferred-maintenance-ridden building, while regarding you suspiciously as the new owner who's thinking about kicking them out...