the small lot concept can be pretty good as it allows you to divide the one property into separately sellable  properties.p

There comes a time when the $ draw seems to outweigh the return.Although I am NOT throwing in the towel, my frustration is I know it can be done but will only get marginal results doing what everyone else does.

I'm certainly not worried if it's 27.5 (depreciating life of unit) divided by 1.5 (years as investment property)...my concern is if 30% of the profit is taxable due to owner occupied 3.5 yrs vs renter occupied 1.5 yrs calculations outlined in my prior message to you...just wondering if someone knows the correct rule that will be applied by the irs.

He has purposefully kept the Investors separate in a divide and concur strategy. 

For each component I've estimated the cost to replace, the estimated number of months of remaining lifespan, and divided those numbers to arrive at an amount per month for each component.

The problem I have with this deal is he's not a real motivated seller, is a soft touch running out for 50% of value, not a good businessmanWhat I would do is to sell him on an installment sale at about 50% of market rend payment, divide 750 into the sales price

@Kenneth B.You are going to have to draw architectural plans before you start your addition, or have the drawings done by an architect/engineer who will put his/her seal on them.  

We want to make sure it goes smooth for them and us.What documents should we use to draw up the agreement?

@Abhay K. basically answered your question with the questions he proposed you need to find answers to and with - price = NOI/cap rateYou need to find what market cap rates are, take the NOI from the property and divide by the cap and you'll know if the $3.5MM is too much or if it's right ballpark where it should be. 

yes you can. you may need to provide evidence of your ownership and your constriction plans and engineers drawings showing your intent for site. they won't just move it wo good reason. even then get ready to wait.