Please consult a real estate attorney for legal advice before you act on any comments in BP forums.

Buy a property that perhaps has a legal suite or a duplex.

They then did the STR model (with permits) and are able to cashflow a substantial amount.However, this only legally works while it's your primary residence.I've got other friends that used their VA loan to secure the rare plex in Alexandria.

Legally you can claim estoppel and latches as a defense as they let it go on for so many years and you relied on it when buying. 

There is a possibility that you could keep this buyer under contract (for example if he tries to cause you legal trouble) if he is willing to wait (which he will if he is an investor who was underpaying you what you think itis worth As Is. 

I'm also relieved that I hired a local real estate attorney to help create a county-specific, legal MTR agreement for our house-hacking situation.

I suspect a legal, permitted garage conversion ADU will cost ~6 times your estimate if hands off and probably at least 4 times your estimate if you do the finishes yourself.  

The good thing about househacking a legal multifamily unit is that lender allows you to use the vacated units of 75% market rent as an income to offset the potential current mortgage.

Is it a legal 3-family on the city card?

I'd be surprised if the way they are teaching & doing the lending is legal.