I assume there were permits for the build, did your guy have you pull them or did he pull them under his company name? 

Also, what legal work has to be done when I do get tenants?  

Have the terms written in your purchase agreement in simple words you and your seller can understand and then title/Escrow will write up the Note/deed in legal language and you both sign off on it.

I would say consult a legal person to help you with this but it always seems to me that if it is a rental you split the monthly profit.

I am more interested to know the operational and legal ramifications of this set up though if this model is successful to improve the cash-flow and the value of the building in min 5-year time frame.  

I wouldn’t want to represent myself if the tenant gets free legal counsel from tenant advocate groups.  

And it sounds like there would not be any (legal) problem with beginning and ending rental contracts on the 15th/14th-- is that correct?

The property next door is a triplex in a smaller lot,  that was grand fathered in.I wonder if that easement could be argued to provide the square footage needed to qualify for a conditional use permit.

Hell, mabye even permits.

Check with zoning to make sure its a legal 2 unit house .Besides that if you separate the electric , and get it for $135K  its sounds pretty good .