Are you saying the owner went out of their way to get the property rezoned to reduce units?  

House hacking comes with many advantages like:1.Reduce or eliminate housing costs 2.Gain flexibility 3.Mitigate risk 4.Tax benefits You could also apply for an FHA loan, meaning you'll need a down payment of only 3.5%.

I could also see a garage conversion reducing the value of homes in certain areas. 

The key benefit is that you've reduced the risk of vacancy in your initial few months of ownership. 

You have the lease to show rent amount, and zero documentation to show rent has been permanently reduced.

@Benjamin Sussman One option is to reduce your 401k contribution to the employer match level — nothing more, nothing less.

Take a year and 1- listen to a BP Show per day, 2-cut your living expenses as much as you can believe it or not you can find $1,500/month by reducing rent & car & cutting luxury expanses and in a year you will have $18,000 - this will suck but it’s an investment!!

What are your preferred ways to reduce the amount of volume? 

I would sell for two reasons:1 - It maxes out the value of the existing equity.2 - It doesn't reduce the cash flow of the original properties like refinancing does. 

3) Is there any way (apart from a 1031 exchange, which I believe is fairly rare for syndications) to avoid or reduce deprecation recapture as an LP?