Properties with ADUs

[DJ Cespedes]

Hi All, 

I have been putting in offers on Multi-family units in Oakland, CA for the past few months now without much luck. Im using FHA and my offers have been beat out with Cash or Conventional offers outside of my budget. Given my current budget, im at a disadvantage when competing for multifamily units, so im rethinking my strategy.

I have now been looking at SFHs with ADUs, bonus spaces, or spaces with potential to be converted to an ADU (ex: garages); although I would prefer a home with an already built ADU as that would save money in having to convert. I have come across several SFHs that fit this bill. The issue is, many of the homes I found with ADUs are done without permits. I do not want to run into an issue where I buy the home and then im unable to obtain the permits, or have to tear down the unit because it is non-conforming.

I also dont want to run into an issue where I purchase a home where there is a nice size garage only to find out that I cannot legally convert it to an ADU for a variety of reasons.

I have called the County Planning Dept, but they were not much help in providing any clarification. In fact, they probably just confused me even more. 

If I am unable to obtain traditional income producing property (duplex, triplex, fourplex) right away, then id like to get something that can still produce income and eventually cashflow. Aside from income, I also want to build equity in my property which is another reason why I am considering properties with potential to add a legal ADU or get retroactive permits for non-permitted work previously performed.

Does anyone here have any experience with homes with non-confirming units, or converting space into ADUs?  Should I just steer clear of properties with non-permitted units? Any insight would be helpful.

Thanks! 

DJ