Do Basement Apartments count as Multi-family?

Question

We live in the north Atlanta metro area, and we are looking to house hack. The issue is that traditional duplexes/triplexes are pretty rare, but basement apartments are very common. We ourselves used to live in one. My question is, can you get multi-family financing for a house you where you convert the basement into a separate unit?

Andrew Postell · Answer

@Graham Young you have some good comments above and you've got some layers here as well.  Meaning, if making such a change on a property is allowed in your jurisdiction, are there financing options for you that will allow this rehab to be rolled in?  Likewise, if a renovation loan is possible...can you compete in your market with such an offer?  Also, are there comps in the neighborhood that justify the expense of this modification?

Usually, when we are competing on the MLS we are having to pay top dollar for a property.  This usually means there is not enough room for us to roll in renovation costs into an already high priced home.  So, you usually have to be ok with paying MORE for a property.  Meaning, coming out of pocket more money.

Now, when you make your offer on a property with a renovation loan...your offer is not as competitive as other offers.  Make sure you ask your lender about these things.  How long it takes to close, how your contractor is involved with closing, the role of consultants in your renovation loan, etc. So, if my offers aren't competitive...that means that I don't win properties I really want...and I'm left with only properties that nobody wants.  Now my choice is to either take a home that nobody wants...or be ok with using a "traditional" loan and coming out of pocket the ENTIRE renovation on the property. AKA coming out of pocket even more money.

And then you have to make sure on comps.  It sounds like there would be a good amount of comps to choose from.  So, analyze those comp values to see how those apartments affect value.  Make sure you are also paying attention to the ENTIRE property.  So, if the kitchen has quartz countertops...that means that your new property that your renovating needs to have it as well.  It also works in reverse too though.  We don't want to OVER-improve the property either.  If none of the properties have quartz countertops, then adding them won't affect your value either.

Hope all of this makes sense how I am describing it.  Things could absolutely work out here...but these are the things you need to be aware of when speaking with your realtor/lender about this type of an acquisition.

Abel Curiel · Answer

All the best to you on your search!

Abel