With mortgage interest rates at 5% they are losing $433/month or, to relate to cash flow, they are eating $433 of their positive cash flow before they deduct any other expenses.

I wouldn’t recommend using Zillow for this because I would estimate 80% of the data is very old and wouldn’t apply.

It’s very unlikely to have been related to the home’s systems, since it’s a brand-new house.I believe I have a handle on how to proceed, but I’d appreciate any advice on how to handle security deposits with regard to cause, and tips on dealing with insurance.  

"Cash" in real estate is a relative term. 

And to be clear, I'm not talking about personal tax returns, only the schedule "e", as it relates to the property I am looking to purchase.

Been lurking here for a while to pick up some data/observations on different markets. 

I have a couple of questions relating to this:1) I was hoping to get some peoples take on what they think we should offer as a structure to potential investors.

Hopefully this will clear things up:You are correct with your understanding that you can't write off any costs related to inventory (the house) - whether that be the cost of the house, or items to improve the inventory (like lumber, paint, contractors, other flipping expenses).However, if the cost does not relate to the purchase or improvement of inventory (the house), it can be written off as operating costs, as you noted.

The relative would give cash as a loan to buy the land and build, and then 2 years later, you'd need to take out a real mortgage from the bank and pay back the relative.

Needless to say, my first phone call would be to Denver Zoning.I spoke to denver zoning and the size of the ADU is relative to the lot and not the primary dwelling.