In-law suite pros and cons

[Annabelle Lee]

Right now I am evaluating a house to purchase.

This house is a bungalow with 1 bedroom on the main floor and a loft style 2nd bedroom. 
It also has an in-law suite in the basement with separate entrance.  It is an open concept bachelor.  Top and bottom are currently rented out.

The tricky part is that I don't think this in-law suite is legal.  When inquire the city housing dept, they have only found paper work of this house as a single family home with no indication of it having an in-law suite.

My question is, if I purchase this house, would it be better to do the reno and paperwork and have the basement convert to a legal rental unit or convert the house back to a single family house.

Do house with an in-law suite appraise more?