"Illegal" fifth unit...

[Stephen Sloane]

Hey folks, 

I purchased a four-unit rental property in Southern California, back in 2012. At the back of the unit is a studio apartment, that a previous owner must have converted (probably at the weekend) from two one-car garages. It's a very nice unit, which brings in $775 per month. It doesn't have its own gas or electrical meters. I somewhat gullibly said at the time I would call the city, have them look at it and see what they think... Everybody and their brother said, "No!!! Don't even think about it, just rent it out and pay the utilities." So, I did. Roll on seven years: Now, a realtor who's doing a valuation on the property tells me if that studio were legal, the property would be worth at least 70K more that way, and maybe a good deal more than that. My question: If I consider getting this studio legalized, am I opening up a Pandora's box? My thoughts are that I am, but the hastle may be worth it for the increase in equity. Has anyone out there been crazy enough to do this themselves with their "extra" unit?