I am new here and could use some adviceHere is the situation:  I own a condo in South San Jose, CA that needs a total gut. 

I totally understand what you are saying about slow and steady wins the race... but right now, riding the appreciating housing market is the way to go.

I feel like my buyer got an exceptional deal on this home, mainly because I wanted the security of having it sold and at the earliest possible settlement date.I could easily see how a seller who doesn't care about their reputation would be more likely to cut corners and skip on some small details in this scenario.

The question we are having a tough time with is how to value the investment in the ADU relative to the total property.

I Rehabbed the both units for about $25k and its now all rented out totaling $3,400 gross. 

My search of hard money lenders operating in that state (Kentucky) yielded no results in terms of lenders who would accept a secondary lien or finance something in this method.I think if I could secure financing this could be turned into a good deal.

But then today when we went to the new apartment, the floor plan is totally different then what he described to us.

Similarly anything more than 10% office and the building may be considered "specialized" or "flex" by the tenant pool, which again handicaps you when it comes time to release. regarding the lease itself, 6 year term is great from the perspective of a secured income stream but you need to consider where we are in the cycle.

If the deposit is low, it may be a low risk option.2) Reasonable with moderate risk of her shopping around but you can still build rapport and secure the deal.

I'll refund their security deposit, pro-rated their unused days - do whatever it takes to get them out and move on.