That lien needs to be added to the cost of any refi, and changes the calculation when or if a refi makes sense.

As you continue to grow you'll thank yourself later that you prioritized bookkeeping because playing catch up can be difficult and costly. 

So the cost to turn this into a living space might be exorbitant.....check this out with a GC and/or Engineer before you go too far down this road....

Incentivize their utility costs and construction.

BUT, it all can still lead to major cost and time problems if the borrower files for bankruptcy protection.

Same for backyard - even if it's small, cutting it in half with a fence makes it easier for both to enjoy a holiday barbecue in their own space.These are low-cost options that will help create a better relationship with tenants.

You mention the acquisition costs are $1M and the construction costs are $1M and total costs are $2M.

Every penny you borrow to buy something else cost $$$ and its time value should be considered.

It is bad form and will cost you in the end.

This is why hedge funds are buying up single family homes, cattle farms and slaughterhouses, farmlands, etc. and driving up the cost of every day goods.