Using Hard Money on unlicensed building?

[Bud Dwyer]

I recently found an off market Building that consists of two Duplexes. The problem is one of the Duplexes was originally a storage warehouse that was converted. It currently has a certificate of occupancy, but not a residential permit. After speaking with the Agent I understand this means it won't appraise and I have to come in with cash. I'm thinking of using a HML for 6 months then trying to convert to a Conventional loan once I get the Duplex licensed.

My Agent tells me I can use the rents (Once I own the building) to pass the appraisal at that point, but I've never heard of that before. Has anyone done a HML to Conventional on an Unlicensed Building before?