He says all of our rent payments and the down payment will go towards our principal when we get a mortgage to buy.He's also going to have the 2nd floor converted back into an apartment on his own, making it into a legal 1 family w/accessory apartment.

He's also going to have the 2nd floor converted back into an apartment, making it into a legal 1 family w/accessory apartment. 

For example, I could house hack my residence now and actually make money but I’m just choosing to keep the house to myself and rent out my accessory dwelling unit separately.

@Robin Lee - CT just passed a law to make accessory dwelling unit rentals allowed by rite, not exception. 

complete renovation , kitchen , flooring , bathrooms , landscaping , painting and a luxurious accent wall and accessories throughout the house What was the outcome?

It's often referred to as accessory living space (without cooking facilities) or an accessory dwelling unit (if it has a full kitchen).Unfortunately, there are a lot of contractors that will just take your money and build it without permits, leaving you with an unpermitted and illegal addition that you might have to remove later on. 

Or are you looking for a full garage plus accessory dwelling unit (ADU) on top? 

@Steve Smith - ADU = Accessory Dwelling Unit (aka Mother-in-law unit)

Most legal multifamilies will be in DC proper, and typically in Columbia Heights, Capitol Hill, Trinidad, Deanwood, Anacostia, with a few other scattered through the other neighborhoods.Properties that have, or could have an ADU, Accessory Dwelling Unit can be an option as well.And the most popular strategy for house hacking in the area is the rent by the room strategy.

However, there is an additional unit in the garage 300 sqft (sort of ADU/Accessory Living Quarter).