The status quo was generating no revenue at all, so my downside was limited.There's no City-run inspection programs here, so there's no certificate of occupancy stuff to worry about in the same way as there are in other markets.  

What are the potential costs/downsides?

The downside is you probably aren't going to find to many financing options besides going to the bank.It's really tough to find properties that will cashflow in the nicer areas of Los Angeles these days.

This is a downside of out of state investing, even though I’ve used this inspector several times because I wasn’t physically there to flip the switches they couldn’t be checked.

- As long as it's not marketed as a Mutlifamily, when I go to sell, is there any legal downside or potential issues with this arrangement? 

The downside is lower quality of tenant and a slightly less robust economy than SLC and south.

@Joseph Hennis I agree but better yet, don't have any money in the property so your upside returns are infinite and your downside doesn't matter as long as the property cash flows comfortably.  

The downsides?  

And it also gives you plenty of time to set aside the money to pay the bill.The downside is that if you're not good at planning, then you will be facing a pretty hefty tax bill in January without the funds to pay it.The rapidly increasing property values in the Houston area can really take a toll on landlords.

I’d say it’s slowing down a bit, but unless the economy tanks and unemployment goes up, then as a buy and hold investor I think my downside is limited.