To give you an idea of how we approach it, we assume the worst-case scenario right from the start is 9-12 months of no rent, $5,000 in legal fees, and an additional $5,000 in expenses to deal with moving their stuff, putting it in storage, and dealing with health code violations or NOV's from the city during the process. 

That will only leave healthcare to be something I will not have direct ownership or control over as I cannot feasibly own a hospital, nor an insurance company.

Also, be sure to notify your insurance company that while you are still living on the property, you also have tenants. 

Deduct NEW property taxes after you buyDeduct home insurance costsDeduct maintenance percentage, typically 10%Deduct vacancy+tenant nonperformance percentage(we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)Deduct whatever dollar/percentage of cashflow you wantNow, what you have left over is the amount for debt service.Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative price to offer.If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.As long as the ARV checks out, this is the purchase price to offer.It is probably significantly below the asking price.

A Illegal simply starts a business entity , gets an EIN and insurances .

We also recently got notice from our home Insurance that they are cancelling our policy because of exposed wires discovered by their inspector.

In addition, you would need enough working capital to pay for insurance (which will be going up a LOT in Los Angeles) and to pay for property taxes.Don't buy this unless you have substantial resources and a cash cushion to keep yourself safe.

.: Quote from @Andrew Steffens: Curious what is the purchase price and taxes/insurance/HOA?

As you alluded to, sometimes a passive note investment purchased for monthly payments “goes south”, and becomes an active participation investment, with plenty of additional capital required for legal fees, forced place insurance, and property taxes.  

What kind of insurance do you carry?