Converting a 2-family back to 3-family - any experiences?

[Matt Z.]

Hi BP Forums,

Have a question that may be tough to answer - it's probably very dependent on local regulation.  But I need to start somewhere, and formulate my approach...

I viewed a 2-family house yesterday.  Beautiful 200 year old historic home in amazing condition, with all the right upgrades & maintenance (including foundation, electrical, etc).  Outside the "historic district" so not subject to those restrictions. The place has it all - great architecture, historic details, a rare landscaped backyard.  I'm very familiar with the market and have a 175 y.o. 2-family 2 blocks away - high-quality tenants go crazy for houses like these.

Currently, this is the configuration (roughly):

1st Floor & 2nd Floor - Combined into an owner occupied apartment, ~1200sqft per floor. Amazingly well cared for, kitchen is jaw-dropping, etc.

3rd Floor - Small (~660sqft) 1-bedroom. Active lease with happy, professional tenant. Above-average condition/fixtures.

Up until ~25-30 years ago, the 2nd floor was its own apartment. The current owners combined the 2 floors into a big owner-occ unit. There are remnants of the 2fl kitchen still visible - including a sink and a couple floor cabinets. The rest was ripped out and a built-in closet installed, making the kitchen into a bedroom.  The bathroom is still in place, and is fine as-is. In theory, the 2nd-floor "apartment" needs only a kitchen and a few locking doorknobs to be ready to lease as its own unit.

The question is, what would I be in for here?  The positives are that all units have 2 means of egress (interior staircase down to front doors, and rear staircase/porches). However, I have no idea what they would require to bring the place "up to code." Would they just require 100% compliance on the new kitchen, or would they start to nitpick elsewhere - for example, number/distance of electrical outlets in all other rooms (would be a major pain), or even the rise/run of the 2 egress staircases (impossible to do anything about, and Id have to walk away)?

It is located in New Haven, CT. In my experience, regulations/approvals here are tough, but fair.  They are very safety conscious, but understand that the majority of 1-6 family housing stock is over 100 years old.

My tentative thought, were I to make an offer, would be to make the offer contingent on an Approval to Start Work (or at least something preliminary) from the Building Department. Never approached something like this though. If I am able to make this place into 3 apartments, it would provide good cash flow even if I was to owner-occ 1 unit. If not, I would have to pass. The combined 1st/2nd apartment is way too big for me, and way too big (with a pricey market rent) for what the majority of tenants in the area need. I could see getting stuck having to rent it below market value just to get someone in there. The little 3rd floor apartment is only worth $1000-1100/mo.