Private seller running multifamily under the table

[Robert Haworth]

Hi BP:

Just had a conversation with a private seller who has a 1600 sqft multi for sale in PA. He was living in the house with a buddy and about a year or so ago he did a rehab that converted a 3/1.5 to a 6 BR/6BA. 

He's a plumber and did all of the construction, electrical, plumbing work without permits. He's not on the books with the local municipality, and therefore has not gone through any safety inspections, has no fire safety or egress means in place and is not paying taxes on the increased beds and baths. He uses no leases, only collects rent in cash, and likely doesn't report the income.

We would never run our business this way, just not worth the risks. We've run into this a few times with local multis. 

Besides this guy dropping his price so we could mitigate these issues, are there any other comments/ideas how to solve this? 

Thanks.