our house needs your advice and help

obv different cities have different rules and practices, but I would think (based on my experience with somewhat similar situations) that if you have a licensed contractor that's cool with you, he/she would be authorized to get permits for the repairs, and that gov't officials would be less likely to give you trouble, require inspections that could get you in trouble, if it's an emergency repair, as opposed to "new construction" or something along those lines.

basically, the two big problems as I see it are:

1. getting the money to make the repairs
2. getting the repairs done w/proper permits which sometimes require authorization from the property owner

re 2) this is where the 'house' part of it could come in handy. a house may not need a permit to get a new roof

re: the illegality of the living arrangement - that shouldn't stop you from looking around for a lawyer for some expert legal advice from someone in the area. Most lawyers will advise you that your living situation is illegal, etc. etc. but they aren't going to call the cops and have you shut down.

If you are seriously considering buying the building yourself, however, you definitely need to talk to a lawyer and find out what kind of liability you're opening yourself up to. In some municipalities, single family homes cannot have more than one stove, for example, and a violation can carry a significant fine for the property owner. I'm not saying don't buy it (I wouldn't, but I have a higher aversion to that kind of risk) but at least do so knowing exactly what you're getting into.