"Illegal" Third Unit

[Ryan C.]

I have a possible duplex/triplex I am looking at buying in GA that the previous owners have added an additional third unit to the property.  This third unit doesn't seem to be legal as the property is listed as a duplex.  Has anyone had any experience rezoning a property from a duplex to a triplex to make the property legal?  Or conversely what are the ramifications of leaving the third unit as?

I am looking to buy this with hard money and then refinance it, but that will most likely require it to be zoned correctly in order to secure traditional financing. 

Any help would be greatly appreciated.

[Curt Smith]

Many a hardmoney's appraisor kills the deal day before closing. Often you loose your earnest money. You have a lender problem as well as a code / zoning problem. IMO the biggest problem is can you get financing to buy. Your 2nd issue is will the perm financing lender REFI out the hard money? DSCR needs to support rent on just the 2 legal units.

DSCR = $sum of monthly rent for 2 legal units / $PITI needs to be >> 1.25.

My buying requirement is DSCR >> 1.8. I never buy marginally cash flowing deals. 1.8 is my min. For you, you need to be good DSCR at just 2 units rented else lender's appraisors will kill the deal.