Sounds like you're asking for a private lender to go into second position to convert equity into cash behind an existing loan on these properties. 

You can always sale on your date and convert appreciation to monthly cashflow.  

Purchase price: $265,000 Cash invested: $200,000 1930’s historic home with a converted garage.

I do convert some of these people when they come back to direct bookings.

Just on these forums, we have heard of groups having a convertible note structure in their syndications. 

The fact that the sponsor can unilaterally convert the notes to equity furthers that bad taste.  

Quote from @Jason Wray: Yes, you can use an FHA 203K program or even convert it to Fannie mae and use a renovation loan if the LTC/ARV allows.Cool thanks for the info!  

Whether it’s reconfiguring layouts, adding square footage, or converting single-family homes into multi-unit rentals, the goal is to unlock value where others don’t see it.Distressed properties aren’t for everyone, but for those willing to put in the work, they offer some of the best returns in real estate. 

But that's still a far cry from converting an R1 to R2 .

He buys small barns and converts them into 2-3 bed cabins.