Rental License issues

[Grant Pope]

Hello all.

Looking for some advice and also looking to get a few opinions.

I just looked at a duplex that was listed on the MLS. My realtor sent it over and it looked to me to have some potential. As we walked through the property, we noticed that this "duplex" was indeed built as a four-plex. Separate utilities, four kitchens, four bathrooms, four entrances. My first thought was I had found a gold mine, but I called the city and they informed me that the rental license that was grandfathered in had lapsed and was not renewed. The old four-plex license was removed. When the new owners bought it, they got a new rental license on the property that allows for 2 unrelated people or a family on each side. That is all the city would allow at that time.

Each side of the duplex is now huge. Over 2200 sq ft per side. Almost too big for the area. 

Here are my numbers as it sits:

Income:

$2600

Expenses:

$650 - (vacancy, repairs, cap ex, management)

$250- taxes and insurance

$180- owner paid utilities

$300 - my cash flow

TOTAL: $1380

Left to pay monthly mortgage: $1220

So given these numbers I can still get this thing to cash flow, and if for some magical reason I could ever get the city to change the rental license back to save the integrity of the property, this would be a home run! 

Looking for thoughts and opinions. Any one ever deal with rental licenses in their city?