BP Nation- I've been speaking with many mortgage brokers and haven't been able to  break through in the least. 

I have two 4-plex's on lots next to each other in Colorado. They were built in 1948, fully permitted and have separate electric and gas metering and share water and sewer service. They are reported at the Assessors site as 4-plex's and the zoning supervisor has confirmed that they are legal but now non-conforming as the zone district was later changed to duplex zoning  and are thus "grandfathered-in" and can continue in their use as 4 units for as long as desired. 

For me to convert to separate legal descriptions and sell them individually at better valuations, the end-buyers of course would have to get separate loans. There is a clause in the zoning code - that is common in the greater metro area cities here and probably nationally, that if less than 50% of a structures value is lost due to fire, etc, that the structure can be rebuilt to its present use of 4 separate units. But if damage exceeds 50% of the structures value, then it could only be rebuilt to its new zone district rules, which only allows duplex's now. 

If the hypothetical fire, etc damaged more than 50% of the structure's value, then two of the future Condo owners could not have their units rebuilt and the remaining two could have larger units. This same language is commonplace, as is the presence of non-conforming structures as zoning codes everywhere get changed from time to time. 

Whenever I speak to mortgage brokers, they say that two of the future condo owners wouldn't have collateral for their loans and I wouldn't be able to offer owner-financing on it either. I've also been told that after it is converted to Condos that its unlikely an appraiser would check the zoning for an individual condo loan but that's not a wise thing to base a project on. 

I would have to make disclosures to buyers that 2 units in each building couldn't be rebuilt in the over 50% casualty scenario. I would likely have to find a way that their interests would be bought out by overinsuring their units to fund a buy-out as their part ownership in the land can't be insured,  and all could lead to a possible huge problem years down the road. 

I have to obtain a "Lenders Letter" from the County on what the "Rebuild Rights" are for the individual owners and have been told it will mirror what's in the zoning code on rebuilding a damaged structure - the same 50% language. 

Is there something I am missing or another way to make this work? Local zoning authorities have the ability to damage an investors fee-simple ownership rights - so to speak - and there is another duplex in another local metro city I have the same problem with.

Condo Conversions don't involve county government and are done through the state-level Common Interest Ownership Act by recording a condo map, declarations, and bylaws to create separate legal descriptions, which the Assessor then puts in its records. 

Any suggestions out there on how to execute the much-better strategy of separate Condo sales despite the 50% stipulation on the hypothetical fire situation?