Off-Market 2 Family (with a twist) Analysis

[Kyle MacDonald]

I've been referred an off-market 2 Family property in CT that I'm evaluating and I'd love to hear what others think. This would be my first investment. 

The property currently has 2 official units (with 1 with a long-term tenant). Each unit is a 2BR/1BA in very solid condition. The catch is that there's also a 3rd floor unit that the previous owner had occasionally (illegally) rented out which is a 2BR/1BA on it's own. The reason it's illegal is because it's only zoned as a 2 Family. 

Currently there is $2100 Gross Monthly Rents for the 2-units. 

So, I have a few things I'm interested in hearing some opinions about

• I know for a fact they'd go for a $240,000 offer which given expenses/taxes ($824/mo) would cash flow $216/mo. Is that worth it?
• Given that this deal is not on the market and there won't be an agent fee - should I be reducing my offer? If so, by how much? I was thinking 5%
• Should I also reduce my offer any more given that this is an off-market deal?
• Should I be concerned with the 3rd floor psuedo-unit? I'm worried that my lender will be concerned because there's appliances and a stove up there.
• Is it a possibility to convert my 3rd unit into a legal rentable unit? What is involved in that process? I assume my taxes will increase - is that true?
• Any other thing I should be weary of?