@Benjie DeVera Three rather large, warty, and unpleasant possible issues come two mind:1) The partition of the house into four units was done w/o permits - this means there is no verification that the work was done correctly and in compliance with building an fire codes {are all the units separated with an appropriate fire break}?

Do some searching on BP, you'll see compliance experts, attorneys and those of us who know RE financing issues have discussed this matter, for over a year.  

To some people that’s not that hard but it is a specialized skill.My moms masters in art education had little to do with being a very successful RE agent for 30 years.My sisters degree is anthropology, she’s the manager of a compliance and anti-fraud division of a credit union.You may find the book Set for Life by Scott Trench insightful.

You'd also need an entire team of people to track down compliance with every property, Something the city doesn't have.

Be sure to check with compliance issues in Texas City. 

Emphasis should be on his compliance with both your lease/rental agreement and city law.If he is unable or unwilling to resolve the matter, then let him know you need to talk with him about a move-out plan.

Performance will be based on your management skills and the current market, not the seller's historical performance.Once, under contract, you will want to spend time and money looking at everything from zoning compliance, utilities, seller's tax returns, building lifecycle issues, etc.  

There are some workaround solutions, some of which work in some states, and not in others, but even the workaround solutions are complex and still require rigorous attention to state and federal compliance issues.

(BTW I've encouraged several un-incoporated vendors to get incorporated.)The penalties for non-compliance is that YOU as the vendee could be resposibile for the Federal Income taxes of the VENDOR.The $600 threshold is extremely low, I pay the huy who cuts my grass more than $600 a year.

It's up to you to stay in compliance.