Don't rent undermined units.in LA...between sophisticated tenants and tenant advocacy groups it wont end well...you could possibly live in the undermined unit to mitigate risk..always ask for the LA city inspection to see when the last time the city inspected and if they were concerned with the unpermited unit or other defects.

Could you just bring your capital to a 506(b) deal as a Sophisticated Investor and learn/earn that way?

Im not a very sophisticated investor like many in this group, but i just keep it simple does the rent cover my expenses and someday the tenants will pay this place off for me. 

Sorry this got long, but I hope it gives you a sense of where you should aim as you go from noob to sophisticated (if you choose to do so). 

You guys are so doom and gloom, come on man, the fed (that caused all this btw) is going to save EVERYONE, Banks, credit unions, trust and mortgage companies, investment banks, underwriters, brokerage firms, hard money lenders, stock speculators, the airline, auto, restaurant,hotel, bar, retail, casino, and travel industries,money market funds, the repo market, the global fx market, the stock market (direct purchases soon), the bond market, the derivatives market (oop's sorry ronin capital), consumer spending (helicopter money only 3 weeks away), your local bowling league and oh yea, air bnb.Don't worry the largest financial event of our lifetimes, BY FAR, will be over in a jiff and you will be rested and ready to get back to work!

Many investors neglect to follow corporate formalities and their LLC is deemed to offer no protection.A more sophisticated setup is a holding company in a state like Wyoming, which controls all the subsidiary LLC's.

42, I got a late start to REI (just started last year), I own 2 SFH that are currently rented out, another SFH in the process of getting rehabbed and will be rented by September, I own a piece of vacant land near a casino, and I'm almost on contract with my first duplex (a City-owned property).

Where I live in NY houses go for 600k  plus...unless you are a celebrity or born with a silver spoon or are wiling to work for 60 yers before becoming a home owner... you'll never own a house.Getting creative and using Other Peoples Money is not bad, its sophisticated and 100% valuable.

If you are a more educated, successful and sophisticated investor, he will likely not get your respect and will fit right into the used car salesman type personality. 

Reg D 506(b) allows for unlimited fundraising and up to 35 sophisticated investors.  506(c) requires accredited investors.