Buying SFH for Rental with Non-Permitted Renovation – Bad Idea?

Question

Hey everyone! I’m looking into a house for a rental, but I found out that the original seller converted the carport into a room and added a laundry room without permits. I called the city, and there are no records of permits for the work.

Could this be a problem in the future? One concern I have is with insurance—if the laundry room floods and causes damage, could the insurance company deny liability because it wasn’t permitted?

What other risks should I be aware of, and do you think it’s worth moving forward with this property? Any advice would be appreciated!

James Mc Ree · Answer

You could make your offer conditional on Seller getting properly permitted with the city. That would put the work back where it belongs rather than you taking it on. Seller might decline, but it could be the start of a negotiation and incremental progress if you really like the property.

Mason Weiss · Answer

I would avoid it. I know of an investor here in AZ where the city is now making them do proper permitting due to the previous owners room addition. It is a pain with both time and money. Unless you are getting a great deal I would look for a different rental.

Ying Tang · Answer

@Mason Weiss Yeah I would probably move on. Thanks Mason!

Chris Seveney · Answer

yes this could be a problem. I would look to figure out what would be needed to get it properly permitted and then I would discount that cost plus some from the property incase any work had to be redone.

Ying Tang · Answer

@Chris Seveney Thanks Chris!

I’ve come across your posts a few times here and just wanted to say—you always share such great info. Really appreciate your input!