However, the nearby schools are not that highly rated (5-7) compared to a couple of lesser properties in Elk Grove proper (smaller square footage and fewer bedrooms, worse condition).

Wholesaler possibly, rookie investor possibly, or an experience builder who has a different exit strategy (build bigger for a better ARV, subdivide lot and build 2 houses, raise the roof and double the square footage).  

Found out from the town that 20% of the total square footage can be used for the home.

Thsquare footage is included in the home' tax assessment.

We'll reroof at the same time and maybe bump out the back of the house to add square footage. 

Im not sure if its a square footage thing a number if units thing and/or if i have X number of units if they combine the number of units and classify me as a commercial landlord

This would be items like mortgage interest, real estate taxes, home owners insurance, utilities etc.Pro-rating the expenses have to be done in some logical methodology.If the units are of equal size - they should likely be 50% allocated to the personal residence and 50% to the rental property.if they are not equal - you can pro-rate based on amount of rooms or square footage.

Make your adjustments for:Year built, Sq Footage, Baths, Half Baths, then start diving into condition.

I effectively paid little for the illegal units when I brought the buildings (say $200 PSF), but the square footage is good, they have respectable enterances, decent light, amenities, etc. so it’s worth the hassle of dealing with the city.

Apx square footage is 1380.