Buying a 4 unit, and adding a unit. First time house hacker.

[Travis Kumar]

I am currently looking to house hack a multi-unit property in MD, VA, PA. I just submitted to a few lenders recommended here, and have begun speaking with realtors. My question is, some properties I see have 4 units that are currently rented. They then also have space I can convert. Cash flow is very hard to find, but they look like opportunities to force equity and cash flow. Assuming i can get the permits, can i buy a 4 unit, rent all 4 units, and convert the basement to a live-able space for me? Does this then turn it into a 5 unit, or once i purchase, I am free to do this. If I should be thinking about this problem differently, I am open to all insight. I know there are other ways to make money, and cash flow isnt everything, but I think if I can convert an area and rent current units, I will be further ahead. Thanks in advance for any feedback.

[Bill B.]

You’re probably going to marginally decrease the value of the property? (Assuming you do it all legally, otherwise definitely.). You’re really going to hurt your of if you ever need to refinance or sell. You’re turning the property in to a commercial property. So, higher down payments, higher interest rates, and shorter terms. 

I’ve only seen it done the other way. I purchased a 4 unit + “owner’s closet/storage area”. The owner’s area had everything but a kitchen, just a fridge and a microwave. This made the lender comfortable calling it a fourplex.