Property Came With a 5th Unit Not Listed. What Should I do?

[Pamella Molano]

I am new to real estate business and I am in the process of purchasing a 4 unit multi family property. While doing the property inspection we found out that the owner had turn the property garage area into a 5th unit. This unit is rented and the tenant is paying monthly. This is a great thing and makes the numbers look much better, but I am unsure how to handle the county paper work or what the process is to update the records. The property is listed as a 4 unit multi family in the county. I am very exited about this deal and I just want to make sure I do everything correctly.

[David Brent]

How did you NOT see this 5th renter on the rent roll FAR earlier in the diligence process? It just seems odd that you were doing a property inspection before financial analysis and LOI.

My *guess*, is that this rent situation is illegal, and the laws in the area change when a unit is >5.. so seller is keeping this on the DL.  (formally turning the 4 into a 5 may turn out to cost a lot - more than the rent you are getting.)

So - a lot to worry about.  Seller gave you bad books, breaks the law, and you think this makes the deal look better?  I walk from deals where sellers are not honest and upfront.