If it's legitimately for security reasons make sure you document the specific reasons and add it to your SOP to head off any future claims.  

Consequently, the place is trashed and will need substantial rehab.

Total head-ache.  

I want to do so to deduct against a substantial amount of capital gains for 2020.

If you do it enough, you can do a quick number crunch in your head for a property to see if it's even worth your time to go any further with the property.

I’m thinking now is a good time to get a cash out refinance, as I believe the forced appreciation is substantial.

When you add in the equity paydown you should at least be even on expenses and hopefully ahead on expenses.After both units are rehabbed and the refinance, the value of the property should be substantially higher than purchase price + rehab costs. 

If you have allocated a set amount to real estate, that amount would be enough to add substantial value to either the single or the duplex (maybe your ADU) after which you could refi and your overall cost structure be better.

Typically the bank will be comfortable letting you "pull out" 70-75% of the appraised value of the home.So, if you're getting it substantially under value then you should have a great opportunity to re-use the cash by doing a Cash Out Refi.

You have to tackle it head on.