I've heard a few strategies that even those houses can be profitable, just not in traditional strategies.  

I'm house hacking so not exactly the traditional BRRR deal.

If an offmarket deal is really, really good, it won't be an off market deal for very long because these things tend to come to light in this type of market.

Plans: new roof, 7th 2 bedroom unit in attic, light reno. when units turn over.

The same thing seems to be happening in other areas where folks are getting the green light for continued working from home, and flocking from major metro areas with high costs of living, to areas where they are able to buy (while interest rates remain low) for the same amount of (in some cases) cheaper than rent- again driving up purchase price point and your % all in changing.

You also have portfolio/private lenders, seller-financing and other non-traditional methods once you reach that cap. 

Just paint the space and light it up really well.

Roof(flat membrane) was repaired 3 years ago due to a lighting strike. 

The Biggest missing piece from your plan is lots of light.

Renting an illegal unit does not offer you the protections a traditional rental would.