Unpermitted Multi-family Purchase Risks

[Ben Capone]

I am analyzing some multi family properties and one of the properties is a tri-plex with two attached units that are unpermitted. Assuming this is likely why the selling price is lower than expected. Does anyone have experience purchasing a multifamily property with unpermitted units? What are the risks here? Appreciate any feedback or tips. I think this property has some great opportunity but I don't know what the worst case scenario would bring here. This is in San Diego county for reference. 

[Dan H.]

My experience is the tolerance for unpermitted units in San Diego is location specific.  City Heights has so many unpermitted units that they likely exceed the legal units.  Other areas have a more strict enforcement.  If your property is in Rancho Bernardo, I would be concerned about the unpermitted units getting scrutiny and potentially get tagged.

Are both units unpermitted? The reason I ask is SB13 has text that would protect one unpermitted unit for up to 5 years if there is no health or safety issues with the unit. It is an ADU law and would expect that in that 5 year grace period that you would legalize the unit.

Good luck