I don't think you are going to be able to get insurance for two separate living units in a single-family when they are both illegal and likely do not have the correct egress windows (basement) for fire safety which could subject you to huge liability if something happens to either party.

Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice.

Curious as to the draw fee amounts you all have seen that have deterred you from wanting to pursue that method. 

Figure out which method makes the most sense for you and look at the numbers for at least 10 deals.

This is the simplest method, but it also means your tenants are more likely to abuse the utilities by leaving windows open with the heat or A/C running, leaving lights on, ignoring the toilet that constantly flushes on its own, etc.3.

Quote from @Kevin Hoover:  Input needed for least tax methods of unwinding a family partnership in the next 13 years. 

Start early, raise that equity well in advance, and make sure all those forms and verifications are filled out correctly.

Verify and double verify with the applicant that the information they have provided is correct and that all income is verified and all adults will have a background check. 

By adopting the house-hacking method—living in one unit while renting out the others—we plan for the tenants to cover the mortgage and gain valuable property management experience.

I see posts on CA insurance that appear to be ignorant to both the past method used to set insurance prices as well as the approach the current commissioner is advocating.The current policy had insurers set rates based on past losses.