However if you have enough reserves, 6mo or greater then I'd say chance it but a couple of missed payments from the tenants and you have to foot the payments out of your own pocket.I'm all for taking risks but I think you really need to evaluate the age of the major systems so you don't get hit with a bunch of cap ex all at once as well as your reserves. 

There is a profit but not worth the risk.  

Is it worth it to go through the proper process with the city and run the risk of a huge expense to make this a 3rd unit? 

@Jacob Hrip For a first-time investor, financing options like a HELOC or private funding depend on your strategy and risk tolerance.

Whether it's considered an arm's length transaction is debatable, but it's not illegal.Move forward with the sale and ensure full transparency with all involved parties, including your CPA.

I recognize that commercial real estate is struggling, with ~30% vacancy in downtown Portland and homelessness issues, but I believe this property’s tenant stability and quality make it a lower-risk option. 

Sometimes occupants still live there and eviction is not easy, and I have even heard a story once that the yakuza are involved in the construction and real estate business and exorted money from buyers through occupants in these properties. 

That is a mouthful, but again, a patient investor with the right risk profile, can be successful in Huntsville.  

Undoubtedly, your involvement has lead to increased business funneling to Obie...Two questions:Does Obie insure free-standing mobile homes (without land)?

Of course, every owner's situation is unique and factors like the legal entity involved, purchase date, adequate passive income that can be offset with the cost segregation study, etc., will need to be considered.