thoughts/experiences on buying houses that are split into multi-families?

Question

Ive been looking at MFH buildings (mostly 3 to 10 unit buildings) and Ive been shying away from houses that have been split into multiple units. some very large older style houses in this area are split into upwards of 7 studio/1bedroom units.

cost wise the houses that are made into MFH's are cheaper when comparing to buildings that were built as MFH's.

Do any of you own them? are they something to stay away from? It seems that the houses made into MFH's are typically 25%+ cheaper than actual MFH buildings.

Aaron Montague · Answer

Account Closed

Both properties I own are converted SFH.  They started life as MASSIVE three story SFH.

One is a straight up triplex (three flat).  There are 2 3/1s and a 1/1 tucked in the attic.  The heating is slowly being separated, but was put in when oil was 50 cents a gallon.  I've put a fair amount of labor into the place and got a company to insulate the entire thing a few years ago.  That should pay for itself in less than 4 years.

The other house is actually larger.  It is split into 4 apartments.  Whoever designed it was kind of a mad genius.  It makes no sense to explain the split in words, but each apartment works nicely on its own.  Heat is separate for each unit.

I like both my places.  They have their challenges, but each makes me a nice chunk of change every month.

Sam Leon · Answer

others have commented on to make sure the conversion is legal/permitted, the new layout makes sense, and the utility billing aspects.

I will also add that to look at the maintenance aspect.  Unlike traditional multiplexes, where even if you have one water meter, you still may have say 4 shutoff valves entering each unit, four central AC systems, four water heaters etc...all delineated.  For a converted SFR, you migt end up with three water heaters serving five units, with one single shutoff, and two tanked water heaters and two little tankless in two of the six baths, that makes it a nightmare for maintenance because you may have to shut everyone down to solve a problem in one unit.

Also mailboxes, I know one property I saw a few months ago was a five plex that was a fourplex with a converted garage and they had an issue getting the post office to recognize a fifth mailbox as the garage has no door number.

Colleen F. · Answer

We own one of these and of course it is both a positive and negative.   It was a big stone mansion converted in the 60s and I can't imagine how it could have been a  single home.  The 5 apartments are all different.  This is a challenge because something is going to be routed wrong in the heat or the electric. Also fair rent needs to be adjusted for some of the plusses to this apartment and minuses on that one.  It is what it is though. You need to look at things like doors and fire exits.  You also need to see if the systems work for you the way they are.  Sometimes you need to pay heat because it isn't separated and deal with less then ideal layouts or lack of  closets.  The plus for us is there is nothing like the property.  The hardwood floors and fireplaces aren't made today and if the building wasn't special in this way I doubt we would have bought it.   As we bring it into the 21st century we have comments on how much people like it but there are days when I wonder why we did it.  You have the mix  of the split and the challenges of a dated building so it isn't something to go into without some consideration. I would advise that it is more about the particular property then it is about the converted vs not.

Andrew Kerr · Answer

Hi Isaac,

I have looked at a couple of SFR that were converted to multi-family in my area. The one big issue I found is that they were split without informing the city. I just imagine all sorts of issues coming up if I ever needed a city inspection. Then there are a couple cities in the area that have city ordinances about how many unrelated individuals you can have living under a single roof. In this case, you could run into challenges with the city if the property wasn't split properly and if there are any ordinances on the books about unrelated individuals living under one roof.

Dave Savage · Answer

Two things:

Make sure the split MFHs are actually classified as the # of units advertised by your city.  Many times I find unpermitted splits of units which will need to be de-converted.

Secondly check how the utilities were split with electrical and HVAC being issues when these are converted.  Ask the tenants if they are there when you walk through how the heat is in the winter, etc.

If the conversions are well done it shouldn't be an issue to pick one up.

Account Closed · Answer

My advice is only anecdotal, so take it for what it's worth. But I have two stories:

First is my own: We bought a 5-plex that had been converted from a SFH. I ended up hating owning it.. Some units were smaller, one was huge, but the one thing they had in common was they were all awkwardly laid out. The really huge apartment was a long term tenant family who had a dog - which I understand. They had lived there for 7-8 years, it was their home.  But I didn't want dogs in the smaller units, frankly they were just too small for dogs and packed close together so you could hear your neighbor, and they were shorter term tenants. But it caused strife among the tenants. I ended up selling not even a year into it. Luckily I found a sucker who bought it for the same purchase price I had. (I was young and stupid.)

The second story is my in-laws. Their son was in college and was renting a bedroom in a five-bedroom home that was divvied up into separate living areas.  The owner put it on the market FSBO, and my brother-in-law encouraged his parents to buy it so he could rent from them. They paid full asking price. My BIL was going to do the property management for them. Except he was in college, so in 2 years he graduated and moved away.  So they went to hire a PM and found out that the area wasn't zoned for multi-family housing and the law required that no more than 2 unrelated people could live there even though it was basically 5 separate areas.  So they had the choice of a huge expense to convert it into a legal duplex with separate living areas for families, or managing from 200 miles away (keep in mind it was a college party house by then.)  It sat empty for awhile. Now they rent it out for far less than what it was bringing in as a 5-plex. They won't sell it because of their pride in making a mistake in buying it.

Account Closed · Answer

great info everybody. this really helps.

when looking at places I will be sure to check and varify that the city knows/appproved how many units it has been divided into. allot of the ones around here that I look at are just odd that they were ever a single family home because they are typically around 5,000 to 6,000 FSF.

One i was looking at earlier was 6,400 FSF 3 story Victorian that was divided into 8 units for $210k. apples to apples a conventional 8 unit multi plex seems to always be well over the 300k price tag and yet the rents dont seem to be that much different....atleast according to the listings

Account Closed · Answer

Thanks Dave, never thought about asking the tenants  about heat in the winter, good advice for here in nebraska. ( there is a house split into a big MFH that is new on the MLS, says it has steam heat so I bet he doesnt wanna hold through winter for a reason).

any one else have any advice on buying SFH's split into MFH's? are they harder to sell than a traditional multi family when it comes time that I wanna get rid of it? harder to work on electrical/plumbing/misc.?

Mark Gallagher · Answer

Account Closed the only thing I usually see in properties you are talking about is that they are so poorly divided. You'll also probably have a lot of third floor walk ups in what you're referencing, making rents go down, and rental pool smaller. Personally, I'd spring for the well-developed building.

Colleen F. · Answer

@Roy N. that sounds like one monster building.   I have seen some posts about how you update and it seems like you do separate them out correctly. It is a challenge though. Our units are only about 800 square ft and  separate heat is  a future dream. the furnace is one of the things on the newer side.   Water is well so while I would love to submeter it I don't think we can.   We have been adding more insulation though and updating electric

A lot of things I understand better now then when we bought the place but you learn something new every day.

thoughts/experiences on buying houses that are split into multi-families?

Most Popular Reply