Illegal studios and converted garage/basements risky investment?

[Jesus Magana]

Hey Bigger Pockets Community,

Been looking for my first Oakland investment to house hack and I've came to realize that there are ALOT of single-family homes with illegal studio or illegal converted car garages/basement. From a REI point of view this is both promising and risky. On one end you have the potential for additional income and on the other hand you risk having to take everything down because it is not up to code. This home is in a C class neighborhood (Eastmont) and is almost 100 yrs old. I know this will limit my tenant pool, but from your perspective, is the risk worth the reward? From your experience, is it worth trying to bring these spaces up to code? How could I bring these spaces up to code?

Appreciate any guidance/insights here. Thank you all!

Jesus

[Mason Hickman]

@Jesus Magana

Think about the consequences of a fire in an illegal unpermitted unit. Injuries occur and insurance denies your claims. Get the property up to code or you’ll be putting yourself at risk. Assume anything illegal is going to be a cost to get it corrected and updated to code when running your numbers.