Smells like a rose or a fish?

[Robert Mayo]

The numbers on this deal seem excellent, but I need help on due dilgence. This smells fishy to me.

Tri-plex with 1/1, 1/1, and 2/1. Rent $400, $400, $500. REO asking price $35k, located in neighborhood of $35k SFRs. Tri-plex is a converted 1900's SFR.

2% rule: 1300/35000 = 3.7%. NOI = $7,800 (50% rule). Rehab cost is unknown at this point, assuming $30k rehab and it still meets 2% rule.

Trulia claims it sold in June 2009 for $300k. 89% depreciation in 5 months! How is that possible? Also, even if June buyer never made a single payment can they foreclose quickly enough to have it back on market in November?

Things I need to research:
Rehab costs.
Is the tri-plex conversion legal? Could they make me unconvert?
Check for mold, dry-rot, termites, toxic waste, lead, and asbestos.
Have professional building inspection.
Roof inspection.
City has new ordinance requiring all rental property to be
inspected and brought up to code (I'm surprised that's legal).
Find out implications for this property.
Anything else?

Comments? Am I going to regret this or love it? What's the gut feeling of the experienced people here?