Good points.I'd add square, level, plumb - license, insurance, bond - using permits to follow codepointing out problems the owner doesn't realize they have that are serious. 

This can then be used as a negotiation chip in order to lower the price of the property.

Rentals are extremely difficult to make pencil right now but would only personally consider higher end projects because the costs are far easier to absorb than trying to build in lower value neighborhoods.

These markets are attractive because of their diverse, resilient economies, lower priced homes, and stable home price appreciation.

If average sale for the area is 200,000 at 3 percent = 6,000You would need to close then 20 transactions in a year at the 3% level for 200k price to get the 120,000 commission.4.

Will you get a lower rate waiting? 

Basically, there's no free lunch when it comes to taxes.Depreciating property lowers your tax basis.

Would the IRS allow them to benefit from a 1031 Exchange if they would be "swapping" a million-dollar rental for one that is much lower in price?

I invest primarily in a lower cost area but also own property in, and am looking in, a higher cost area.

Deviations from the Private Letter Rulings will significantly increase your risk of structuring this type of advanced 1031 exchange.You should discuss this more advanced 1031 Exchange structure in greater detail with your legal, tax and financial advisors to determine your comfort level with this complicated 1031 Exchange structure and the inherent risks involved.