Make sure you are properly accounting for the increase in taxes you will encounter, also make sure that if the property is in HOA covenants that renting is permitted and if doing short term make sure thats permitted as well.

The fees are for the architect and permits because apparently the house is not a legal two family it is setup to be one with two water meters but just not legal.

You can't get a permit and they are really cracking down on folks operating without a permit.

Like I said, I am a complete newcomer and am personally interested in purchasing rental property, but I'm just wondering how this piece fits into the overall puzzle. 

It looks like it was nicely done but without permits as county records show as 2-1 and seller claims it to be 3-2.

I have found some City offices difficult to work with, permitting especially...but, I bet if I was a contractor that pulled permits frequently, it wouldn't be as large of a hassle.

@Justin McElroy  I think most lenders who will be financing construction costs along with the purchase will need contractor bids as part of the loan application, and you may need approved building permits before closing. 

Simply non-renewal (or if the law permits, monthly increases of their rent is a passive-aggressive way to invite them to leave). 

To share some numbers on how many projects are being submitted with multiple units... see below data on the permit applications for City of San Diego, which is a combo of public data + our analysis on text fields describing the projects (to extract things like unit counts... it's directional, not perfect data).

Wholesalers should adhere to industry standards and regulations, including obtaining the necessary licenses and permits, and disclose any conflicts of interest that may arise during the transaction.Overall, real estate wholesaling can be ethical if conducted with transparency, honesty, and integrity.