Positives:Extra income.Today FNMA doesn't really care about non-conforming areas as long as LIKE properties transact in your market.Added income for a potential buyer.Negatives:Insurance - If destroyed you couldn't get it re-built.Possible fines or you could be asked to re-convert the home back to its permitted use.What happens if a tenant gets injured by living in a non-permitted area?  

If you really are looking for cash flow in the North Side there are some affordable apartment buildings not a 4 flex and they have all one bedrooms which you can convert into 2 bedroom units or 3 bedroom units as I have found many that are oversized and will allow a nice conversion.

@Princeton Washingtonyes broad sweeps, try to get as many as they can convert. 

In some hot Chicago neighborhoods, investors are converting two-flats (1500 sf ea unit) into single family homes, rather than converting a single family home.  

Here is my suggested scenario:Partner converts 401K to a SDIRA. 

This 2/1 can easily be converted to 4/2.

@Ali Halljust curious why you want to convert to a commercial loan?

It's a single family that I will convert into a 2 family property that's  the person is asking 160 and I believe I can sell for about 350 after about 80k in work.My issue now is that I don't know people with that money in the bank as I grew up in a relatively broke family.

I walk through the property with a spreadsheet that I convert to a pdf that presents as a scope of work/rehab order. 

Cody,Ideally IMO you will want to convert the contract to a trust deed and note before buying the contract.