Grandfathered mother in law that can't be rebuilt

[Andrew Gingerich]

Hi BP Community, 

Looking for a bit of advice here. I am currently trying to close on a single family home that has a mother in law (MIL) home in the back. The homes are metered separately. 

The appraisal just came back and we were told that although the property is zoned for multifamily, the MIL does not meet legal set back and is effectively on the property line. The zoning requires that the MIL be 15 feet setback from the property line. As such, the appraiser will complete the appraisal as "Legal- non conforming". As I understand it, if the MIL was damaged or burned down, we would not be able to rebuild it. 

The property is a good one is likely to meet or exceed the 1% rule, which is really good in my REI area. The property is also in an area close to downtown that is ripe for gentrification over the long haul.

The appraisal however gives me pause. 

I'm going to call the insurance company and make sure they will insure the MIL. And in the event of damage... they'd let me rebuild it to meet setback and zoning requirements. 

Any advice is appreciated!

Andrew G