Purchasing a Duplex permitted as a Single Family

[Mike Waltman]

Just got off the phone with a potential seller. He purchased a 5/3 single family home as a complete beat out foreclosure, renovated it and now has it set up as a 3/2 - 2/1 duplex. Units are not rented out as they are doing a Live-in Flip. Looking at the county appraisers site it is still permitted as a single family but the lot is zoned for multifamily. 

If I were to do this I would be purchasing with private money and refinancing out. My concern is that having two units would cause a problem when it comes down to the inspection for the refinance. 

Since its zoned for multifamily would it just be a matter of applying to get it re permitted as a duplex? 

Seems like there could be some trap doors hidden here but I can probably get it around $120k (about 70% market vaule), its newly rehabed with nice finishing and total rents are around $2000. Would cash flow very nicely so its worth considering.