I posted in a related thread about condo conversions of two legal, non-conforming 4-plex's in Colorado.

I've had great success working with a local bank for commercial loans on non-conforming properties. 

I have seen a few for sale recently with non-conforming apartments & sketchy/soon to expire occupancy permits.

Investors seem to leave a lot of money on the table by not aggressively searching for lower insurance rates and challenging tax assessments.Also, I'm aware of several conventional lenders that do not have loan minimums, so you can get conforming rates on 30-year loans (just called a regional bank and was quoted 5.50% w/ zero points for 30-year 20% down, fixed as long as you have 4 or less financed properties, with no minimum; another lender is at 4.50% with 1.75 pts at 25% down, probablyi a better deal if you plan to rent and hold).

From what you said, the property is nonconforming (meaning it doesn't conform to the current zoning code), but you should check to see if it is legally nonconforming. 

Borrowed funds are not allowed to be used to close conforming or government insured or guaranteed mortgages. 

I had mulled over similar possibilities but couldn't quite tell if I was just making stuff up as I went along ; >  I haven't been in the property yet, but it looks like the 4 apartments are on floors 1 and 2 while the office is in the basement/garage of one unit and the other unit still has a garage.Might this be another situation where talking to a portfolio lender who's not beholden to loan conformance would be the best bet?

Hello Ivan,1) Most likely you will NOT be able to use your own appraiser. 2) The marketability of a property with an illegal conversion depends on the quality of workmanship AND its conformity within the neighborhood.

If there are already non conforming properties on the street that will make it easier to get the same exemption for you.

Then after 6-12 months of seasoning on the property cash out refinance it to get money for your next project and turn it into a conforming loan with a much friendlier term.