Convert 5 units to 4 units

8 Replies

Hey everyone. I found a property that is five units, but the seller is renovating one of the units and the listing says that it could be converted to a laundry room instead. This would be the only way I could get the property because I will be using a VA or FHA loan. The problem is that I have no idea how this would be properly documented and verified. I also have no idea what authorities would sign off, nor which parties would need to take what actions in order to go through the process.

Can anyone shine some light on the situation?


P.S. Bonus points if you can offer guidance on how to go back to five units... legally, of course.


Convert the 5th to the laundry room (or dead storage), and then buy it as a 4 unit. If there is an issue along the way (remove kitchen, etc, etc.) just do what they ask. 

When you have the loan, convert it back to a 5 unit, and insure it as such.

Things to look out for: Watch your loan documents to make sure there is nothing that prohibited about increasing the number of units. Secondly, make sure that you don't have to have a new CO issued specifying 4 units. 

You can manage this to a certain extent by your network. If you have a favorite banker, then find out who they use for an appraiser. Go make friends with the appraiser. If you have a good relationship with your appraiser, then you can find out what your pinch points will be ahead of time. An appraiser can't break the law, or make a 100K property into 200K (well, not usually), but they can help you to know how their business works, and how you can make their life easier. If you make their life easier, your life will be easier.

Hope that helps.

Good Luck!


Thanks James! Can you elaborate on what you said about the CO? I'm not sure what that is and who issues it. For the appraisal, I'm hoping to use a VA loan and if that doesn't work, then probably FHA. As far as I know, I have no control on who will be appraising, nor any contact with them.


A CO is a certificate of occupancy. It sometimes has different names. it's generally issued by the city/town government and details the number of units in the building allowed by the city/town. 

Theoretically, the building you are buying is legally 5 units at the town. You should check, very discretely, to be sure it's a 5 and not really a 4 with an illegal unit. If you find it's only a 4, then you need to reevaluate. It could  be grandfathered, so keep that in mind.

What you want to have happen is that your appraiser indicates on the appraisal that it is a four unit. Since you want to put the other unit back in service at some point in the future,  you want the city/town records to show 5 (or grandfathered ).

You don't want to have the city/town change it to 4 because then you have to have the city/town re certify it for 5, which is a ROYAL PAIN.

The best thing to do is stuff it (unit 5) full of boxes of stuff, put a sign on the door that says "private", "storage" or "no entry" and ONLY show it to the appraiser if he asks. All, and I mean all, of the paperwork, including the MLS listing needs to say 4 units.

Hope that helps and makes things clearer. 

Good luck,


Hey everyone..!!

Am from Chennai, India. Recently I have got luxury apartments in Chennai from the reputed builders. Would like to know will I be able to convert this 3 BHK house to a 4 BHK unit? Will this spoil the look of the apartment unit?

Thanks for the information and advice @James C.  I'll be sure to take it all into consideration!

Good advice from James. We just bought a rental house that was listed as having 5 units. All 5 units were occupied. As it turns out, the folks in the third floor attic apartment were moving out. The seller agreed to convert that space to storage. He had to remove the appliances and cap off the plumbing. 

We were upfront with the bank about converting the fifth apartment. They were fine with it. You can be sure, by the way, that the appraiser will look at the space and will take photographs.

If the building is located where temperatures fall below zero, don't forget to turn the heat on in your new storage area. Otherwise, your pipes will freeze and you'll have a real mess on your hands. Even though the pipes are capped off, they're still in the wall.

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Thanks @Carol Frome ! I offered on this property and my offer was not accepted, so I've moved on. It's good to hear your experience and I'll keep your advice in mind if anything similar happens in the future!

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