Rule one, the person with the gold makes the rules. 

In that instance you'll find that most national QIs with a large foot print can and will take the time to spend to make you and your client comfortable.  1031 is a federal statute so acts the same way and is structured the same in all 50 states. 

Typically its no Issue untIl you have to do an evictIon or when cIty fInds out.https://www.citybuildingowners.com/rules-for-new-york-city-basement-rentals/Read the article should have the details you are looking for..

Is it allowed from IRS rules?

@Robert ReineriAlso, certain distribution rules apply to solo 401k plan so you may not be able to take a distribution from the solo 401k plan unless you meet a distribution triggering event. 

@Linda MalavetThere is a special rule regarding taxation and collecting rent payments.Rent payments are normally taxed in the year collected.Therefore - I am not sure what the tax difference would be from having a 35 month lease vs a 36 month lease.

Many of the units are 50's and 60's models, and anything that old is going to put up a pretty heavy fight before those wheels will roll - and then you have to hope the axles don't start on fire after 2 miles.  

Redfin defines a price drop as a reduction in the list price of more than 1 percent and less than 50 percent.Talk about tweaking data to make a point.... lol.

It also depends on what type of asset you're investing in (for example, MFH versus storage versus MHP), in what market, what is the investment potential duration, what is a potential value add (if one exists for a deal), whether it is offered via Rule 506 b or c and many more other variables.

I wouldn't rule out single families in the area if you know how to execute that strategy.