Should I Buy a Cashflowing Multi-Family That has Permit Issues?

[Roman Balmakov]

Here is the situation: I found a good multi-family home in upstate NY. It's basically a legal 2-unit that can cashflow $900/month. Economically growing area. GREAT in today's market obviously. 

However, the house has had a new kitchen and bathroom put in WITHOUT permits. Basically, one of the floors was just empty, and they installed a new kitchen and bathroom. It wasn't the current owner who did this, but 2 owners ago. The current owner has had the property for 7 years and has been renting it out without issues.

If I buy the property, I'd want to get the property up to code, so I'd work to retroactively permit the work. The house is selling for $380k. Even if getting the permits winds up costing $30K, to me... it still seems worth it.

Does anyone have any experience with something like this? What's the process of getting retro-active permits on work like this? How much could it cost?

[JD Martin]

My question is why you want to bring it up to code, other than just to feel good or improve your exit strategy? It will be a can of worms for sure and they may go as far as requiring a full tear out and fresh submittal. I know in my area they can require it, and we are nowhere near as strict as NY.