Coverting a house into a duplex ???

Question

I have been looking for an opportunity to turn a SFR into a duplex as a new strategy.  I have a brick home in Denver (strong rental neighborhood), 2 Bed 1 Bath up and 2 Bed 1 Bath down.  I would like to add a kitchen downstairs and so it would be a 1 Bed 1 Bath mother in law apartment downstairs about 800 sq ft.  The basement has its own separate entrance on the side of the house.  I would not get a separate meter, and there are no egress windows in the basement (I would do a separate meter and egress windows if my margins were larger).  I'm under contract to buy the house for 210,000, figure the arv would be 275,000, if I just go in and do my normal routine.  I'm thinking the arv on the project with adding a kitchen in the basement would be 295,000+, which of course would be more profitable.  I'd love to hear from any investors and or Realtors that have listed a place with a non-conforming, move in ready, mother in law apartment in the basement, and the response and or added value they received.      :)  Thank you in advance.

Dan Mackin · Answer

I personally don't think a non-conforming basement kitchen/unit with non-egress windows adds any value to a property. A big issue you can run into if you're trying to sell is that the lender may not like the fact that you have that basement unit and will not fund the loan. I've had it happen to my clients. I'd say stick with the standard SFH route.

For Denver zoning they converted everything back in 2010. There are a lot of buildings that by current code seem like they don't fit, but if they were converted prior to 2010 when the zoning was still favorable to a multi then they are considered grandfathered in. There are plenty where I just send them a quick message to get confirmation that this is the case. It's likely that the neighbor homes have been converted for a while and if they're legal it's probaby from pre-2010.

James Carlson · Answer

@Paul Rogert, the way I'm reading your post, you're not going to occupy this place, right? If you were, I'd suggest maybe leaving it as is -- it has a bathroom, you said. You could then short-term rent it on Airbnb. (A kitchen is by no means a requirement for many Airbnb guests.) It would be within Denver's primary residence rule for Airbnb. It would make you good money. And you would avoid having it classified as an extra unit, which others on here with more experience in zoning seem to think will be a hardship come selling time.

Even if you don't live there, you have the option -- under Denver's Airbnb regulations -- to allow your renter up top to rent out the basement in what is essentially their primary residence. If you struck the right deal with the up-top renters, splitting profits however you agree upon, you could still make out with a well-designed basement space.

Paul Rogert · Answer

The others are not grandfathered in according to county records.  The zoning does not allow for a duplex.  I wasn't planning on turning it into a legal duplex, or having another address, just wanted to see if adding a kitchen in the basement, and turning the basement into a "mother in law apt", might be a lucrative move.   I'm assuming the buyers would have extended family that would rent the downstairs or a smaller target market of an investor that would purchase it and  rent it out.

Lets agree that the area is not zoned for a duplex, and a second kitchen in the basement does not have a permit.  Just wondering if a Realtor or Investor has sold a place like this, and how it turned out... Thank you. !

Collin Jones · Answer

@Paul Rogert I'm finding this thread and curious how it went, did it add value to the property when you sold it as you thought?

Paul Rogert · Answer

Correct James, I do fix and flips,  I wouldn't live there.  I would fix up the basement regardless (they are, and will be, non conforming bedrooms, because of no egress windows), just toying with the idea of taking a risk and adding a kitchen for and extra $7500 (its a strong rental area).  I think the return of adding a kitchen would be an extra 20,000+.  We'll see, I'll post the results after the project.  Thx for all the responses.  I"m out.

Craig Follmer · Answer

Hi @Paul Rogert, any updates on this project in Denver? Did you get it zoned properly to have 2 units?

Prashanth Mahakali · Answer

Hello Paul,

I am an Architect & investor here in Chicago. This is a strategy commonly used by my investor clients in Chicago where more often than not, basements are vacant. This is an entire floor waiting to be utilized. I know that it is not an easy process to go through but consult with a local architect to get an idea of cost and time to do this legally with permits. Ask if the Architect has done something like this before and request to speak with that client. Second, get a general contractor to give you en estimate based on the work  and check references again. Also reach out to a local appraiser since its finally up to someone in their role who will make a determination of value to this project. To summarize, basement duplexing is a wonderful way to expand the use and value of the property. I would recommend against attempting to do all of this without a permit or against local codes. Good luck!

Jeff Copeland · Answer

As stated by many others above, it's rarely a good idea to invest additional funds in an unpermitted, non-conforming upgrade. It isn't necessarily a value-add for owner occupants, and savvy investors will know that the non-conforming use is a huge risk and will not pay market value for it.

Stephanie Miller · Answer

I recently converted a 2 flat into a SFH.  The construction time and budget were both blown!!  First flip ever where I barely got out OK....BARELY>   Ran into too many issues during the rehab..permits...etc then the LIVING AREA was an issue for the buyers...they felt the property was too long and narrow.  Won't be doing again in the near future with the exception of repeating downtown Chicago .  That is always a good investment.

Coverting a house into a duplex ???

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