I'm in the middle of an deal for a legal two-flat in Chicago with FHA financing, but the numbers only work if I convert the basement into a livable space. FHA loan + expenses is $3000, Rental income with 2 units is $3k and the additional basement unit would be around $800-1000.
The basement has a separate entrance, but not 2 entrances/exits. Also I believe the utilities are connected to the 1st floor unit.
I just got an inspection done and sent EMD, but am having 2nd thoughts based on other people's sentiments about illegal units.
Please let me know if this deal is too risky to proceed with.
There is a pathway to make the unit legal through the new ADU laws. However, yours looks not to qualify based on the egress issues you mentioned. Be patient and find a better deal. Do not invest in building out an illegal unit.
The height, separate utilities, etc. does not matter for this way as you are grandfathering it in as non-conforming to todays code/zoning. You pull an FOIA for a water bill from 1950's and if it says "3 unit building" you give that to the city and they send you a corrected zoning doc without even visiting the property. You can then later on separate the meters so you don't have to pay utilities but it's not a requirement. If the basement unit was not there for a long time and was recently built out this strategy won't work and it will be the much costlier ADU build out once the bill is finalized.