This is a red flag because its BS.

Contact the local zoning department (construction, building, whatever designation the municipality uses).

I'm in Redding, CA, and we have a lot of demand for homes under $450k, and rentals.

As we go through the purchase process, what things should we look out for or are red flags to be aware of?

I'm not sure yet if he was on that lease or not.Definitely some red flags here for me.

Atleast 1 of 2 things would set off red flags1.

It is zoned for SR7, a single-family home, but is being sold as a multifamily home since the property was converted into 2- two entrances, 2bed/1bath per unit, separately metered electric.

Do you know if there is a lot of red tape which makes it difficult or is it fairly easy if you meet requirements and lender knows what to do? 

I currently have radiant heat and it's a one zone system. 

@Sean Conroy, this really depends on two things: first, the land zoned in a way that you can subdivide and build more units (question for building/zoning department) and second, financial returns on doing this versus using the capital to buy.New construction certainly has its advantages on the operating side, and can often get a premium to remodeled, older units.