This expense allocation allows for significantly higher cash on cash returns and acts like insurance.

Great flexibility in allocating income and expenses between and among LLC members.

Allocate 75% of the cost of the property to the investment rentals, then use your exchange funds to acquire those three units making sure that the purchase price for those three units is greater than or equal to the value of the property you relinquished.

He also knows how to perform cost allocation studies on rentals when you need them.

A typical percentage of a property value to allocate to land value is 20%, or in this example it would be $100k.

If I purchased a unit that was cash neutral after properly allocating for all expenses at the beginning of 2020 that was renting for $2500 and had average rent increases, my rent would have increased over $1.1k/month.  

It also seemed like an aggressive play of the tax code, personally, but have never done it.Typically, we don’t do another cost seg study upon exit, but on larger properties, we can do a sale allocation study which will reallocate the remaining depreciation in order to minimize the recapture.

The more typical cash flow in the Midwest is a couple/few hundred after allocating for all expenses.In Los Angeles rents went up almost $500 from 2011 to 2018.  

That said....Your post seemed a little bit like you're unsure how you want to allocate your money.  

The capital gain exclusion only applies to the time the property was your primary residence, so 9% of your capital gain due to appreciation will be allocated to primary residence use and the rest will be allocated to investment property use.This means that $675 ($7500 x 9%) can be excluded from capital gains (well within the $187.5K exclusion limit you calculated).