Renting mother in law suite/basement unit

[Michael Downs]

I'm relatively new to REI. I am looking for my second property and found an off market 2 flat with unfinished basement in a transitional neighborhood in Chicago. The numbers are OK with only a 5% cash on cash with only renting the 2 units. If I finish the basement and rent it this goes up to about 18%.

The issue is the building is only zoned for the 2 units. This building is in a row of 7 buildings all built at the same time with the same floor plan and all of the others rent the basement without changing zoning. (Ceiling in the basement is 2” too low as is to rent as a separate unit and have rezoned)

I’ve seen other buildings where they put in a stairway from the within the first floor unit down to the basement as a “mother in law suite” but this adds to the rehab and the rent won’t increase as much as having a 3rd separate unit in The basement.

I’m not a fan of bending rules for this type of thing but if I can make that space rentable this becomes a good deal for me. If I can’t utilize that basement space I’d be buying more for appreciation which I want to avoid.

I appreciate any thoughts on this or if you’ve had any similar experience.

Thanks

Mike