Illegal 3 Family Unit Advice

[Christian Mano]

Hey all, 

I recently had a showing of a legal 2 family house, soon learning that the basement unit was rented out illegally. My question is, what incentive did the previous owner have in not making it a legal 3 family house other than collecting rent off the books? It has its own separate entrance, bathroom, and kitchen (minus a stove). Also, what should I be weary about should I move forward with this deal and handling the 3rd unit? As the owner, am I legally allowed to live in this third unit not collecting rent?

Appreciate all info and thank you BiggerPockets family!