Buying a large house to turn it into a duplex

[Ashley Wolfe]

Hey BP,

I'm looking around at a lot of SFH properties that are on the MLS in my area under $100K. I came across one today that is very interesting. Its a 1957, 2-story, 3,000+ sq ft 6/3/2 on the market currently for $79,000 as-is. I immediately thought it would make a great duplex.

Description states that it needs about $45-50K in rehab.  Let's just call that $60-$80K to be safe.  I have no idea the state of the foundation, roof (which is flat), plumbing, HVAC or electrical.

The estimated ARV of the property based on Sq footage and number of homes is right at $200K conservatively. I checked the comps out on Lifestyles Unlimited Quest and the estimated ARV based on recently sold comps was $205K.

So, buying at listed price of $80K and putting in $80K to turn it into a duplex puts us all in at $160K. We could sell it as a duplex or get tenants in there, refinance, and pay off our private/hard money loans to get the deal done. Looking at the layout, it would most likely be a duplex that has one large unit and one smaller unit that have different rents. If we had a 3/2, ~1,700K sq ft, it could bring in ~$1,100 and a 3/1, ~1,300 sq ft could bring in ~$850 based on the area. In theory, we could potentially bring in ~$1,950 each month in rent to go towards PITI, savings account for future repairs, and the rest to positive cash flow.

I don't want to bite off more than I can chew so I've been thinking that getting a partner for this deal would be a good idea.

I know I need to get into the house and get some of my mentors in the industry to weigh in.

First, what I need to know is:

-what do you think of this deal?  Any red flags?

-in Texas (DFW) do I need to apply for a permit to turn a SFH into a duplex even if I'm not adding square footage to the footprint of the house?

-have any of you converted a SFH into a duplex successfully?

Thanks!