Hi All, 

I’m looking into an investment property where the current owner rents out the house by the room. After he bought the house, he added 2 bathrooms to make this more attractive to tenants. Unfortunately, He did not pull permits to do so, because his contractor told him that it would be 15k to pull them. 

I would like to purchase the property, but I would have to make sure everything if legal and up to code. I am a new investor and have never done anything like this before. Any help or guidance on how to cover myself legally and make sure I am making a good investment would be helpful. Also, I don’t know if this would hurt my exit strategy in the future if I decide to sell it. Thanks in advance. 

@Spencer Woodring You need to call the city building permit office in the town the property is located. They are the only ones that can tell you what will need to be done.

Awesome. Thanks. 

I have run into similar issues in the past for unpermitted work, my issue was more of finished space and a garage converted into a bedroom. Alot depends on the the city you're in, and almost as importantly the building inspector that comes out. Some are more strict than others, and the main concern is that all of the work done, was done to code. Some Inspectors will sign off on site, and others will make you remove enough drywall to check framing, electric, and plumbing. And anything not up to code will have to be brought up to code at that point. Is this a single family, or multi-family?

It’s a single family but the owner rents by the room. So, he added 2 bathrooms that weren’t permitted so every room could have a private bath. 

Buying a property that has had substantial work done without permits is a HUGE risk. First there is the risk of the work having been shoddily done, which can cause obvious problems. But also, you inherit the responsibility of having that work permitted once you purchase the property - and permitting a bathroom isn't cheap (I recently built a permitted 2nd bathroom as an owner/builder in my house).

Having been on the losing end of purchasing a property with a significant amount of unpermitted work attached to it, I would probably just walk away - it's not worth the headache, both emotionally and financially.

However, if you are still intent on purchasing the property, regardless, then once you are under contract, use your right to inspection to have a city/county inspector walk through the property with you and have all the unpermitted work cited before you lose your deposit. This does a few things: (1) it makes it impossible for the seller to lie on the disclosure about the unpermitted work and (2) it gives you leverage in your negotiations.

Of course, the seller could refuse to negotiate with you. But he'd still be on the hook for remediating the unpermitted work before he could sell to anyone, anyway. An open case against the property will show up in a title search.

Eventually, someone is going to have to pay for that unpermitted work. Make sure it's the person who deserves to pay for it.

Thank you for the input. You are soo right. It is a huge risk. I am no longer entertaining the idea, but I definitely appreciate and agree with what you said.