Unpermitted Units but high cashflow

[Brian Cain]

Hello BP family. I have an opportunity to purchase a 10 unit apartment building in Riverside, CA. The owner is ready to retire and part ways with this property asap. Ive been in contact with the owner for 2 years now and now there finally ready to sell. This is a textbook situation, property management sucks (their words) and pain in the butt tenants (again their words). Super distressed seller. Ok here is the issue. Out of all  10 units, none are permitted, that's right none. The property needs some work, tenants are month to month, and kind of a headache. The owner wants to do a 1031 but cant find another property they like. With that there open to seller financing.  Im not looking to keep this, just a quick flip.

Rough numbers:

The seller is asking for 2.5M. With all the problems I countered with $1.3 and seller financing  

The property brings in $190,000 annually. The snapshot below are my very rough calculations. I have it at a 5% vacancy, and expenses at 41% (overkill yes). From you pros out there would you still peruse this with the unpermitted units? Thanks BP