Non-Conforming Property Risk

[Kobe McDaniel]

I’ve recently come across an off-market single family home that has been modified into a triplex with 3 separate floors as units. On paper it roughly pencils out at the owners asking price of 850k. However, it is not permitted and would have to be sold as a single family home 3 bd 1 bth 1000 sq/ft instead of multi family 6 bd ~3 bth 2900 sq/ft.

The other single family homes on this block are roughly 600k each. While I would be getting a deal on this “tri-plex” I am very hesitant to pay so much for this as it is legally a single family home. Furthermore, could the city ever come in and make me shut some of the units down? Also, how would I go about funding this since there’s no way it would appraise anywhere near the purchase price.

Any help would be greatly appreciated!