Mixed use 4 unit property

[Alex M.]

I'm considering buying a mixed use property which is a very interesting place.
To begin with, the building is vacant and although the seller can finance it himself, I am only looking at the option to buy through a FHA 203k streamlined loan, owner occupied. The property has a confusing layout with strange historical uses and requires significant creativity and investment to get all the units ready to go.

Major rehab:knob & tube electrical, heater is 100 years old and not working, 4 bathrooms either have all fixtures missing or are in tear down shape. Upstairs unit was previously used as 12 room rentals with shared common area so spaces are not setup to be occupied as a rental(s). Walls within this 12 unit area would need to be moved around and possibly a hallway built to seperate space into 2 units. A property across the street rents the same configuration as room rentals for $350 each, but that would require significant management which is not something im interested in.basement has rooms but only 1/4 finished.

Basic rehab:Hardwood floors which need to be re-sanded/stained, paint throughout, old water stains on ceilings.

Pros: Cheap initial price for lots of square footage, i can rehab one space at a time and rent them out as they become fixed up. Old era property with focus on restoring on a budget rather than remodeling everything. This propert could potentially be my cash cow, as i currently own 1 sfh and will probably buy another in 3 years or so. New exterior siding and windows. Basement is huge and slab is in place.

Cons: I might be biting off more than I can chew in terms of fixing this place up. No garage or parking lot. Commercial property, so selling may be a PIA in the future. Building structure appears very stong (slab+concrete+huge redwood), but the roof is flat and although permit shows replaced in 2007, they are known to need repair and maintenence.

Details are below with estimated rents when property is finished. The RE agent im working with was previously the property manager for this place and another similar, so estimates are either right on or low for retail and 2nd floor units.

Built in 1900
1800sq ft street level store fronts (2). Both seperate entrances, ~$1000x2
900 sq ft 1 bedroom apartment street level w/ seperate entrance ~$900
2000sq ft upstairs unit ~$1000x2
2000sq ft basement with $1000
Located in SF Bay area
Total rents= $5,900/mo
Property price $290k

Am I crazy for considering this place to live in? My wife and I both fell in love with the idea of living in this older type of place along with the investment aspect. With the FHA 203k route I would plan to use rehab money to have a contractor replace the electrical (15k?) since that is something i couldnt do on my own. I'm a little afraid of the permit process for this property, considering its historical use and what I intend to use it for. The upstairs unit has 12 rooms with a community shower and living area, but I envision it as 2 seperate units. The street level retail stores are seperate along with a rear unit with a huge commercial style kitchen which makes me think the rear unit may not be legal although it has a seperate mail address and built-ints are original architecture?! The basement also has a seperate entrance on the main street, and only part of it looks like it was occupied (brothel in past ive heard?). The space down there is humongous, but not sure if it can be used as a legal unit. I'm worried this property drying up my savings, although I am a penny pincher and can use my own labor and creativity to rehab this place (restoring with salvage materials or remodeling with used stuff).

The wonderful thing would be that the mortgage on this place (20%down) could end up being $1400.mo and one rental unit alone would almost pay it.

Thoughts? I welcome any insight with rehab costs, FHA 203k streamline loan issues, appraisal issues or experience with living in a project like this.
FYI im new here :-)