Single family houses that have units without permits?

[Emma Chen]

There are some houses I've noticed on the market advertising as a single family but have an extra unit or two. Looks like the extra units were added without permits and done illegally. It does seem to be possible to cash flow and have all your expenses covered while living there. However, the cons I am thinking of for this are: 

1. Insurance not able to cover the extra units, so if a fire happened, you would need to rebuild it back to a single-family home 

2. city might order it to be converted back to SFH since it was done without permits.

3. safety is not ensured because the extra unit was built without permits, if anything happened to the tenants it would be pretty bad

Any others to add? There are a lot of downsides, obviously.  If you tried to legalize the units, it would be a lot of headaches too.  Wanted to hear your thoughts on these single family homes with illegal units. The numbers may work, but the risks are much higher here, especially with a tenant-friendly city like Oakland. However, I am curious to hear if anyone has a successful experience with these types of properties, for owner-occupied. What types of action can one take here with these houses?