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. 

The red flag here for me would be the willingness to overpay when they’re not bidding against anyone.

The beauty is that you can easily change your mind on this issue in the future.

It would be a big red flag to me if they are doing a lot of volume in this market. https://www.biggerpockets.com/member-blogs/10145/83067-limited-partner-s-guide-to-investing-in-the-right-deal

The beauty of REI is there is no need to make the mistake my wife I  made early on thinking we could do it ourselves. 

I definitely ended up passing on this "deal" based on the red flags.

While they are beautiful and get you top dollar, many come with tax abatement that expire in 5 years and will significantly reduce your cash flow once expired. 

It’s all about finding a balance between purchase price, financing terms, and smart rental management so you’re not forced into the red.

Also, real builders/experienced developers will often have a true technician, i.e. a civil engineer, architect, real estate attorney et al at least glance at the property info to make sure there are no major red flags.

Congrats - beautiful job on the porch