The property will need a gut rehab including roof, chimney removal, floorplan adjustments, plumbing, electrical etc.

Reserve requirements and lending standards went up considerably as the Covid recession started, but that's just lenders being more cautious and adjusting to current market conditions.Did he say any reasons why?

Looking for real estate attorney who is well versed in CA laws.Need to add an amendment to lease agreement to add/remove tenant and adjust rent.

@Dan Heuschele An infinite return via getting all your money out constantly is completely different from a TRUE 250%-400% Tax free return as I have created with this method after my 2500+ hours of studying and being mentored by the biggest most reputable faces in real estate, i.e the equivalent to what would take someone that's as motivated as possible 5-15 years to learn if they had a full time job (I spent 18-19 over a year of 8 hours a day 7 days a week on learning how to truly be a millionaire and successful in all aspects).Thanks for the tips but you did not answer my question, and I know all of the things you said obviously and I will adjust to the best possible thing available in my situation after deliberate knowledge on each individual matter and having a physical mentor,community and tons of other sources of wisdom and knowledge going into all of this before I start. 

Sure you can interpret the BPO and make adjustments to the information to more accurately reflect the state of the subject property. 

One solution might be to adjust the terms such that the original investors have a 10% pref for the first 2 years of the deal.

After close, I received notice that the appraisal was revised with the "cost by value approach" section adjusted significantly with depreciation decreased such that the overall value of the home increased significantly above the original appraisal price.

Nope- It will just go into your adjusted basis for the cost on those new properties. 

Historically, the S&P 500 long-term inflation-adjusted average return is ~ 7-8%.

Let her choose her own path and adjust accordingly.