I just spoke to my mortgage lender and he did say that if the knob and tube wiring is exposed in the basement and its active (which is it) then more than likely our loan will be denied because the inspector will spot it and red flag it on site.

A lender would have to chime in with actual guidelines, but in my experience FHA doesn't want to appraise further out than 45-60 days from closing max.There are red flags all over their offer, but not knowing the other details it's hard to say 'hard pass'.

1- Not all insurance carriers will cover bldgs with brick foundations. 2- If it needs to be replaced, it’s a major PITA and costs ALOT of $$$. 3- It could get severely damaged in an earthquake. 4- Not all buyers will buy bldgs with brick, so limits your market.Bottom line: I avoid them for long term holds, especially due to earthquake risk. 

If they're taking more than a few hours everytime to respond then thats a red flag in my opinion

There seems to be a lot of red flags in this idea... such as the framing of the shed sitting right on the slab.

Hi @Mahmoud Hass, I find Foremost is the most competitive carrier for my fixer uppers.

If you've been investing in LA for a while, you probably know that real estate agents will say ANYTHING to get you to buy and they will rob you blind if you let them. Never leave your wallet on the table around these ...

When I make outgoing calls the phone gives me the choice to use my carrier number or Google Voice.

Not having a contract to provide is a big red flag for you.

With the way you are operating this property, the insurance carriers  would underwrite this as a boarding house (multiple nonowner occupants renting rooms/units that do not have their own kitchen and bath).This can be written as a commercial policy, but if you have a residential loan, not sure if your loan will accept insurance that is not an official Homeowners policy.