Interested to learn the pros/cons from financial/tax/legal standpoint. 

I believe the city council or something needs to be involved, it’s an involved process, I would assume it’s a single family & go off that, the fact that it’s been illegally converted to a multi family is not a factor in the success or failure of trying to get it zoned as a multi.

Before you get any further, if you haven’t, I would highly recommend writing out your investment goals, your reason for investing, how active you want to be, etc.

For the STR tax loophole I would speak with your accountant on the specifics.

A very large portion of the tax base has left and moved to lesser taxed surrounding counties.

property tax is near fixed in CA.

It's important to get to know the applicant before you just sign off after a fair credit/background check. 

In that case, I would shop it around to see if any other regular carriers will write the coverage.  

@Jamaal Wofford I’d recommend paying off the consumer debt first.

If you need financial help, ask under the "Finance, Tax, and Legal" forum.