Although this is a big industry that can't really move elsewhere due to legal issues. 

Is this a legal unit?

There are also legal 2 units with attic/basement unit that will work all over even in prime areas.

It's legally required but practically every small multi-family on the market does not have one done.Third - what kind of costs are you seeing to retrofit?

I’m all for paying less closing cost but I don’t want to have any tax or legal issues in the future.

They are not sustainable as they are today, by 40 years out who knows what might exist.Regarding the possibility of setting up a PM company to separate income sources, you may need to look into legality of that. 

A lot of forum members are very knowledgeable in their respective fields related to real estate investing, whether that is real estate sales, wholesaling, flipping, rentals, lending, self-directed IRA and Solo 401k investing, or tax and legal guidance.Discounts on some products and services are offered to BP members: https://www.biggerpockets.com/perks/proAlerts can be really helpful too: http://www.biggerpockets.com/alertsThere are a few self-contained guides that you can access here: https://www.biggerpockets.com/guides

IMO, the escalation clause is not without pitfalls and potential legal questions, but I still choose it at times when representing a buyer.   

A lot of forum members are very knowledgeable in their respective fields related to real estate investing, whether that is real estate sales, wholesaling, flipping, rentals, lending, self-directed IRA and Solo 401k investing, or tax and legal guidance.Discounts on some products and services are offered to BP members: https://www.biggerpockets.com/perks/proIf you haven’t been to it already, you might want to check out the BP blog: https://www.biggerpockets.com/renewsblog/The site has quite a few tools that can be helpful for new members.

Many here have suggested collecting a "non refundable pet deposit" - NOTE that is not legal in CAAll deposits are by law, refundable.