We have up until end of 2023 where we could sell the home and not pay capital gains (we meet the IRS' ownership and use test having it been our main home at least two of the past five years).

Water main for the whole street needs to be upgraded 2.

I have 2 main hang ups. 1.

But that assumption, implies that the rental property you are buying is actually negative cash flow, which is not what people are looking for (unless there is far larger appreciation component than you are giving credit for).  

To give some background, I have two tenants (a young couple) renting out a main floor suite from us while I live in the basement suite.

Obviously the main concern is that I would want to refinance out of the HELOC as soon as possible.

The main items ypu want to focus on now when running your calculator is the debt service (mortgage), taxes, insurance, maintenance, Capex (if property is in excellent shape and doesnt need any major improvements then this figure does not need to be quite 10%), vacancy (talk to PM), landlord required utilities (if any), lawn care snow removal (if applicable).

The PM company may be your main problem. 

I have gone under contract on a home where the main house is 4 bed/2.5 bath with a 1 bed/1 bath casita that is a short drive away from the up-and-coming downtown Chandler area.

Spoke to the son in charge and he said his main goal is to just have time to go through everything of his dads and sell stuff before he’s kicked out and of course would like to stay long-term but doesn’t know how that will happen.