However, for the rest I am looking for potential solutions to this situation.”Directing the conversation away from the fact that California is very tenant-friendly will cost you a lot of money @David Lamb.Does the property fall under the Rent Stabilization Ordinance (RSO)? 

If I understand correctly, and if the IRS regulations have not changed over the time of this conversation (since it started 7 years ago), we could (and please let me know if I am on the right track):1.

Last time i called the city inquiring whether garage conversion if triplex was allowed, I was told only SFR’s was eligible for ADU addition.

If you'd like to have a longer conversation.

Do not have telephone conversations.

I am more than happy to connect and have a conversation to talk about my journey and share things I have learnt over the past couple of years. 

Which he didn't so we had to dispatch the plumber so that a tenant can move in.Lets continue this conversation tomorrow.

If it matters to the conversation: I'm planning to sell my STR in Wisconsin Dells soon and roll that gain into this commercial building. 

Conversely, if the seller NEEDED to sell the property to raise money for something, a fair price might be closer to that $2-3/sf number.

These are the few numbers I have (purely based on first conversation) Her operating costs are about $900-$1000/month. about $450 for the county to come inspect once a month, costs of upkeep, meter reading, invoicing etc.