While I am a firm believer that you should not pay for 100% of upside, i certainly am agreeable to paying for a small portion of it and this may have quite a bit, particularly if the condo conversion down the road is feasible. 

Usually includes extra permits and feasibility study time and buffer zones that you cannot build within.

Get with a GC and/or architect to discuss feasibility.

Price is $40/sq ft which seems expensive, but I am going to run an analysis anyways and see how feasible the project is. 

It may be doable, but I don't think it would end up being economically feasible, in earthquake country.

I was answering the OP's question, without digging into the potential opportunities into negotiating price on the illegal unit, depending on the feasibility of conversion (I don't have experience with conversion of illegal units in Oakland either).

Recently coming out of college with a considerable amount of student debt, working as an agent for a brokerage wasn't really feasible, so I opted to work for an RE investment fund.

The worst one I saw was just below 6%.I'd like to speak to a local broker regarding the feasibility of our criteria in the Phoenix market.

With my case, there is a lot behind it that makes the longer-term investment of it much more feasible and the profit potential actually be there.

Another option would be to buy out the first since there is equity, but that may not be feasible if you can't get the funding for it.