You can only play games for so long.Chances are your next door neighbor is an IRS agent and turns you in when your tenants blocks their drive or some other random event disturbing your IRS neighbor.ADU catches fire and your insurance won't cover you, because it was an illegal and unpermitted structure.The city inspector told the last guy not to build or rent it, and is now pissed and wants to make an example of you and just red tags the whole property and no one can occupy for the next 1-2-3 years while you wait for a hearing.Then when you get the hearing, "staff" recommends you tear the whole structure down, and if you still want an ADU, you can apply for a permit and rebuild it.Your tenant quits paying rent and won't move out and you can't evict them, because there is no valid lease and they're just your "roommate".Probably a dozen other bad things can happen to you when you do stuff like this. 

Quote from @Jay Hinrichs: Bruce there is also that famous case in San Fran  in the Seacliff area of 5 to 30 mil homes and someone bought their right of way on a small private street and were trying to block them off and then of course sell it back to these folks.

The ones I’ve come across are in areas with boarded-up houses throughout the blocks, which I’m not quite ready to invest in as a new investor.

That is the thing that will eventually get you over the hump, not talking to realtors who, for the most part, don't know anything about working with investors and have heard the "once I get this first property, I am going to keep going" dialogue a million times.If you want to market yourself, the best thing to do is to walk a five-block radius that you really want to buy in.

Block construction cement floors with the floors sloping to a central drain. concrete counter tops stainless kitchen cabinets boob lights and minimum windows by code .

One block may be legal, the next block may not be.

So we would buy the aceage and since the legal descriptions still called out lot and block we would just start to deed out the lots to get them on the tax rolls and the Assessor would change the maps. 

But it won't be long now.This sucker is circling the drain.

I encountered a lot of bad management companies who just drain investors money.

Our house is in the R2 zone (4 blocks off main) and the process to transfer the permit back in March was a breeze.