Chicago two flat garden units, what are you seeing on appraisals and rent?

Question

The garden unit is the most underrated space in a Chicago two flat. For anyone outside Chicago, a two flat is what most of the country calls a duplex, and the garden unit is the lower level apartment that sits partly below grade.

Here is what I keep running into. The lower unit gets treated two different ways. Sometimes it shows up as its own unit with its own market rent on the appraisal. Sometimes it shows up as finished square footage and that rent never lands on the rent schedule. Those two outcomes change what a buyer can borrow.

So I want to hear from people who bought or refinanced one recently. What did your appraisal actually do with the garden unit, and what is it renting for next to the unit above it?

Henry Lazerow · Answer

The appriser will not count it as a legal unit if it is not zoned as a legal 3. But I have almost always seen the appraisals come in higher when the building has a nicely done illegal unit, just like when you list a property it will sell higher if it has a nicely done illegal unit. I assume they count it as finished space but never look that closely. To give an example I just brokered a legal 2 unit with a 3rd in Avondale at $880k when most 2 units of similar finishes were priced much lower and it still appraised out just fine as a legal 2 unit even though 880k is really closer to 3 unit comps.

Jonathan Klemm · Answer

Hey @Dan Nelson - Are these Chicago garden units it's legal? Or are most of them non-conforming?

I'd assume that if they were legal and on the zoning cert, you could challenge the appraisal to get the rent added properly. Is it happening often where they aren't letting you use rents from a legal garden unit? That would surprise me.

Hossein Sharifi · Answer

The split almost always comes down to one thing: is the garden unit legal? If the building is zoned and permitted as a 3-unit, the appraiser can treat it as a unit with its own market rent on the 1025 rent schedule. If records show a 2-unit, Fannie/Freddie guidelines push the appraiser to call it below-grade finished area. Below-grade space doesn't count toward GLA, and that rent never makes it onto the schedule, no matter how long it's been rented.

For buyers that means checking zoning, permit history and the assessor record before you underwrite garden rent. If it isn't legal, I'd treat the garden rent as upside rather than part of the base case, and assume the lender won't count it. Chicago's ADU ordinance has opened a legal path in some areas, but it involves permits and real costs, so it's a project, not a paperwork fix.

Curious what others have seen on actual rent spreads between the garden and the unit above.

Divin Kanyama · Answer

That inconsistency is real, @Dan Nelson . Appraisers usually look at whether the garden unit is legally recognized and supported by zoning, permits, property records, and comparable sales—not just whether it is finished and collecting rent.

If it is treated as a legal unit, the rent may appear on the appraisal. If not, it may be counted only as finished lower-level space, which can materially affect financing. I would confirm the legal unit count and ask the lender how it handles garden units before relying on that income.

Recent examples would be helpful, especially with the neighborhood, legal status, bedroom count, and rent compared with the unit above. Two similar-looking garden units can be treated very differently. Just a practical investor perspective.

Crystal Smith · Answer

Our experience regarding appraisals is as long as the garden unit is legal the appraiser will count it. We even had an incident where the unit did not have a window large enough for first responders so we increased the window size and wallah the appraisal came in higher.

Chicago two flat garden units, what are you seeing on appraisals and rent?

Chicago two flat garden units, what are you seeing on appraisals and rent?

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