Hey @Prince Martinez
I have added units to rental properties this way multiple times inside of my non-owner occupied rental properties in New York. However, I think it's important to clarify exactly what you're suggesting here before I run through some issues that you may have. As I understand it, this property has 3 total units in it currently. Your plan is to occupy one of the 3 existing units and you are wondering if you can split the other two bigger units into two units each to create a total of 5 units, correct?
If I'm understanding your plan correctly, there are a quite a few issues you are going to face with this. First, as you mentioned in the title of your post, it's zoning and also the permitted use. Each municipality in my state has zoning districts and has rules for how different properties can be used within those districts. I don't know the rules in Dekalb County, GA, but I imagine they are similar. If your property is located in a district that only permits dwellings of 3 units or fewer, then you would need to first obtain a zoning variance from the local zoning board/department. This is typically a pretty involved process as you'd have to submit an application, provide supporting documentation, and typically provide some good reasons for why they should allow you to get a variance. In New York, there is a pretty high bar that a property owner has to meet before a variance can be granted.
Assuming that the zoning district in which this property is located allows for a property of 5 units, you would still have to get approval for the use of the property to take it from 3 units to 5 units. In the areas where I invest in New York, this involves getting approval from the planning department of the municipality (which is different than the zoning department). There may be separate rules with regard to planning. One of the biggest factors that the planning departments are concerned about in my area is having off-street parking. But, there are also other considerations and Dekalb County may have their own. Again, this is something you would have to apply for and try to persuade the municipality to allow you to do.
Assuming you got all the necessary zoning and planning approvals, you would then have to go through the building department to ensure that whatever modifications you do to the property are within their requirements and that your units are building and fire code compliant (there may be certain minimum square footage requirements, egress/ingress requirements, natural light, etc.) This would involve additional applications, possibly architectural/engineer drawings, and inspections of the construction work by the building department personnel. In New York, there are also requirements for contractors that you use. They have to carry liability and workers compensation insurance. I don't know if this is the case in Dekalb County, but it's probably the same or similar.
Finally, you also may have an issue with financing. All owner-occupied loans (e.g. house hack loans) offered by banks have a limit of 4 units that you can have at the property. Properties of 5 units or more can only be financed with commercial loans. Now, it's possible that you can buy the property as a 3-unit using the owner-occupied financing and then make the modifications to turn it into a 5-unit and, as long as you are making timely payments on your mortgage, the lender wouldn't know or care that you have now changed this property to something that the loan product no longer supports. But, it may be an issue and there may in fact be a clause in your loan and mortgage documents that puts you in technical default if you do this.
Finally, once you make the modifications, you're going to want to make sure that you revise your insurance policy. The insurance you take out when you initially buy the property as a 3-unit, will no longer be viable once the property becomes a 5-unit. So, you will need to speak with your insurance broker or find a new one who can insure a property like this. There will likely be a higher cost with this upgrade.
Of course, you can (and some people do) make the modifications and turn the property into a 5-unit without getting any approvals or making sure you are doing it in compliance with the various requirements. But, you may be in a very risky place if you do it that way because if, at some point in the future, the municipalities find out that you did it, you may be prevented from renting out the new units. You may also be fined and they may even require you to turn the property back into a 3-unit at your own expense.
Bottom line is you should look into all of the aspects, rules, and regulations involved and speak with someone (or several people) who are knowledgeable in zoning, planning, and construction conversions like this. Good luck!
Vitaliy
