It's an estimated cash on cash return given current rental rates subtract expenses assuming 7% interest rate, 10% management fee, 5% repairs, 5% capex and other expenses like mortgage, insurance, tax. it's a estimate to tell you what properties to analyze vs ignoreyou can see the are pockets of negative returns as well as pockets of positive return. this is to supplement the data @Devin Conley provided

Then your sale will be for $450K ish (you do subtract closing costs). 

This is most of the depreciation you are taking year one.You can calculate your depreciation recapture by taking the sale price of the asset and subtracting the adjusted cost basis.The adjusted cost basis is what you paid for the asset plus any improvements you made along the way minus the depreciation you took along the way.The profit above this original cost is taxed as a capital gain, but the part linked to depreciation is taxed at a maximum rate of 25% under the unrecaptured gains of section 1250.To recap the tax rates are:- Sec. 1250 real property: 25%- Sec. 1245 property and 15 year 1250 property: Ordinary Tax RatesThere are ways to minimize depreciation recapture especially if you know how to work smart with your CPA.1) Asset Valuation at Time of Sale - Sellers can minimize recapture by reallocating the price of the assets on sale.

You cannot calculate rent by subtracting off the rent of the ADU.  

This is an alternative approach for newly constructed buildings.RESIDUAL ESTIMATION APPROACHThis approach determines the cost of short-lived assets, such as 5 or 7 year property and subtracts them from the total project cost.

Then you subtract your expenses: (1) Fixed cost: property tax, STR insurance, utilities, landscaping, etc

I would count on having at least half market rate tenants, in the event Section 8 rents are higher than market, which they are in our market (granted you will need to subtract the utilities from the rent).  

Subtract $350 for HOA dues, maybe another $400-$500 for electric and internet, and potentially water bills. 

Subtract $2300 for one unit and they're paying $1400+expenses to live in a $2300 month apartment and area.

and subtracting that from your end value + whatever equity buffer you want to account for.- If you're going after a seller finance deal I think once you understand what it will take to get to a finished state its simply a matter of aligning your needs as far as short term cashflow with the current rents/situation, with the net number the seller needs after the refinance.