You need to know if your mortgage permits it on your current house, and be sure you can both rent that cheap for yourself and rent your place out for that much money before you do anything.

I contacted the permit office to get a retroactive permit but they said that they do not issue permits after the fact.

The rental portion of improvements is depreciable, which can give you some extra tax benefit.Sounds like a great learning property that can give you both equity and experience.

Should I spend the extra $$$ to finish the basement as a separate unit (AADU) and rent as 2 units or just add a few bedrooms/bathrooms and rent the whole house ?

Even small lots can have say 4 townhouses if the zoning permits.  

Only appropriate potted plants and other outdoor furniture are permitted on patios, decks and balconies.

Most people get into real estate because of the opportunities to create extra income; buying and then selling, as well as renting, is a big part of that.

In the City of Philadelphia, you will also have to have an extra electric meter to serve common areas, such as lighting and fire alarms. http://www.biggerpockets.com/forums/84/topics/7504...Since you are doing a gut, now would be the time to get the ductwork for both supplies and returns into place.

Check with your local zoning/permit office.I'd stick with the existing footprint and do a complete renovation of the apartment, with the interior upgrades you mentioned.Make sure the exterior of that basement unit is weather-tight, especially after the mold you had. 

Hi all,Any thoughts on how to manage a property under contract that learned a loft does not have permits?