Seller counting unpermitted studio's rent income as part of the cap rate

[Julio Contreras]

Hello BP peeps!

I have a dilemma. I found a duplex in Los Angeles California that has an unpermitted studio. I noticed that the seller and agent has put the studio's income as part of the NOI. I am wondering if this is fair or even legal (I am assuming it is illegal). I like the property and I don't mind the unpermitted studio since I can live in it while I rent the duplex.

Has anyone bought any umpermitted unit before? How much of a risk is it to buy a multi-family with umpermitted studio or room?

I am planning to buy a duplex, live in one and rent the other but if I can get a duplex with a studio for the same price, I am willing to take some risk. :-)

Any suggestions or negotiation advice would be helpful.