I did have a conversation with him and told him that his rent was below market and that there was an increase coming.

I assume the bank will do this appraisal ahead of underwriting the original mortgage.Your best bet is to have a conversation with a local lender about the FHA 203k program.  

I know not all multi families have the infrastructure for the conversion.

Most multi-families in the city are constructed in a way that would make fairly simple de-conversions to single family homes, too.  

Called the city and they had no records of the conversion or of the added on room behind the garage.

@Wesley Nye Permits pulled for renovations and/or conversion?

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