Is a unauthorized apartment a deal breaker

[Alexander Spira]

I have a deal for  a 4 unit multi family house in the New Haven CT area. 

The house has been totally redone in the last 5 years so this property should not have any big surprises.

Price break down for each unit is $850 + $1000 + $775 + $800 = $3425.00 

The property fits the 1 percent rule hands down. 

The catch is the seller wants to do a all cash deal no time for banks etc.

The down side is one apartment is not legal/unofficial and investors are afraid that we will not be able to pull the money out via refinancing or worse get in trouble with the law. 

Can anyone tell me if they had a experience refinancing on a house with a illegal rental and can the owners get in trouble for renting out such a unit.

Also if any one wants in on this deal in New Haven CT please contact me.

Thank you in advance.