our deal flow has increased significantly, and our income is up almost 100%.  

The reasons are 1- less competition in commercial2- greater property types lead to more opportunities for “value added”3- commercial net income projections include expense for property management, 1-4 unit residential usually do not4- greater “universe” of properties to buy allow higher minimum return standards Of course residential is MUCH easier to successfully deal in, and with reasonable leverage has small downside risk, so I 100% agree that most investors should stick with residential.  

However, I talked to my realtor who got started in real estate via room rentals and he shared that as a 'border income' situation you actually have more rights than a traditional landlord.

Also, focus on 2 years of job/income stability.Class D Properties:Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciationVacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions.

the property was tired, needed revitalizing and had huge upside equity & income potential How did you find this deal and how did you negotiate it?

AND you cannot separately sell or refinance that ADU in the future.That said, I ran across this company that seems to specialize in this type of addition: maybe they could help? 

As I've been learning, there are the key taxes to understand when investing into a new area or state:- State business income tax (if you have an LLC)- State personal income tax (if they want to tax you too, even as an out-of-state investor)- City personal or business income taxes- Any registration fees due the city/state- City/state property taxesAnd I'm sure more!

Do you want to be in a place of population and job growth or one with decreasing jobs and population.Do you look at things like average credit scores or % of income spent on rent?

If I calculate my actual cap rate after 6 months by using their convention (Subtracting insurance, tax, property management from gross income) numbers match, thus I am getting what was promised on my proposal.

They used a combination of the rental income, my W2 income and my credit to qualify.