Should I pull the trigger on Multifamily #2?

[Nick Laverriere]

Hello BP community! I currently own a 2 unit that is cash flowing $900 a month and I am ready to buy again. I found a large 4 unit building in Portland ME, a fast moving market with very little inventory. I was impressed with the numbers on this building and was curious as to why it had been on the market for over a month.  I learned today that one of the 1 bedroom units is not legal due to lack of egress and the property has some management issues due to an absentee owner.   The asking price is $550,000 and would be purchased with a low money down FHA loan. The property will have positive CF of just under $800 a month taking into account one unit for owner occupied. My questions for the BP community are: 1. How do you suggest I deal with the illegal unit? Is this a deal breaker? 2. Will I be over-leveraging myself, making it difficult to acquire future deals with seller financing?