Advice on buying a house with an Inlaw Unit (no permit)

I am looking at some houses where the garage area has been converted into a 1 bedroom apartment/unit.

There are no permits on these units.

From a rent perspective it make sense because the house + unit would rent for more than just a house. While the cost of these units is almost the same.

In my area (SanFrancisco bay area/silicon valley), given the high home prices these are the only type of houses that would cash flow.

Do you recommend these types of units?
or The risk/hassles of renting out a unit without permit make it not worth it.

I am relatively new to this and any advice is greatly appreciated.

I’m new to this as well, but our city says this about it:

"For Your Information:

  • The owner of any rental dwelling unit or rooming unit can not legally collect rent
    without having the required licenses.
  • An owner cannot proceed with an eviction without the required licenses.
    *An owner who fails to comply with the Certificate of Rental Suitability requirement
    cannot legally collect rent or proceed with an eviction until in compliance.
    *An owner being ineligible to legally collect rent does not automatically excuse a
    tenant from continuing to pay rent. Payments may have to be made into an
    escrow account."[/b]

San Francisco area is extremely pro-tenant. If a tenant in an illegal unit decides to not pay rent, you can’t make them, and you might have a very hard time getting them out. You might have to refund any rent they had already paid.

My suggestion is to find out if the permits and inspections can be obtained retroactively. If that is possible, make any offer to purchase contingient upon obtaining proper permits and passing all inspections.

My brother worked and lived in Silicon Valley for a while as a new engineer. I visited him there in his extremely small, illegal as heck rental unit. He was happy because the rent was low.

It was a shed-type apartment attached to the million-dollar (in that area) owner’s unit. My brother was thrilled because they let him put up his ham radio antennas and use their workshop. The place was tiny, just big enough for a single bed, dresser, cooktop.

You decide, but personally I have always rented out units that could be illegal and not worried about it. Especially if it is grandfathered in, and you are not the one creating it. If you are not a slumlord, and take good care of your tenant, they will not complain.

But there may be some very anal municipalities with nothing better to do than harrass landlords. I view the unit’s very existence as half the battle won.

But here I created an official unit from an outbuilding by putting up a house number. I just followed the pattern from across the street (805) and next door (806), and put up 804. We threw a handful of dirt on the numbers to age them.

The Mailman said, “I’ll be darned! 804! I never knew that there was a residence here. I"ll change the records in the post office; of course we can deliver your mail.”

You’ll need to talk to local realtors about the difficulty of resale. But illegal units rent every bit as well as illegal, just take good care of your tenants. You gotta do what makes you money.