If you are going to purchase SF homes in lower barrier  C/D neighborhoods be conservative with your debt, set aside plenty of reserves and consider half if not more of your appraised equity to be the result of a generous appraiser because you will likely never see the equity converted to a realized gain. 

If the 5% counts conservative cap/ex/vacancy/etc. then its OK.

The projected appreciation is tough to assign a value to, but 3% is a good conservative number, then it just depends on how much the property is worth.

Hopefully when interest rates go down and rents go up in the next 2-10 years, we can refinance and have better cash-flow.Option 2: Pay with cash right now (~1.3M) and with a ~7% cash-on-cash return we conservatively net ~7-8K/month and properties appreciate with inflation.

We are coming to the new era where company that sells virtual reality , virtual real estate and AI like Nvidia , Meta or Microsoft ; and also "virtual" coin like Crypto is valued way way higher than real actual tangible real-estate like office building , apartment building and so on and so on for example the level of valuation for office building is like a wipe out.If the investment climate continue like this where there's no relevancy between investment and tangible or the real word , how conservative real estate investor like us should react ?

Quote from @Mary Jay: I'm going to give you some tough love because you are making a ton of mistakes.Your current rent is conservatively $700 below market, meaning you lose $8,400 per year.

This is very enticing after seeing what we would roughly owe on the monthly mortgage even if we are conservative and say we will only make $1,000 a month income from the MIL suite (I think we could easily get $1,500).

if the property is $100K and the rehab is $60K you'll need 10-15% down plus closing costs plus holding costs - conservatively 16-24K + 5-10K + 6-12K = 30-45K at leastand you don't want that to be all your savings... so you'd need separate savings and emergency funds - i'd want 25-50K depending on situation, lifestyle, etc.so 50-100K i guessbut that's just a horseshoes and hand grenade estimatethese types of questions are hard because we don't know much about you or your financial situation

The 25 % is accounted for vacancy due to the lender being conservative.

I build and the construction estimates you've mentioned look too conservative.