Potential duplex to fourplex conversion

[James S.]

After lots of searching for my first property, I've come across an interesting one. It is technically a 2-unit that can potentially be converted to a 4-unit. The original structure has near identical up/down spaces that were originally separate units. A previous owner extended the house to have two near identical (to each other) more modernized units up/down towards the back of the structure. It operated illegally as a 4-family before getting notice from the town that it was legally a 2-family. The very surprised current owners converted it back to 2, though I don't know exactly what that entailed.  In its current form, the back of the house is rented and the front unoccupied.

This presents an interesting opportunity, but also several challenges: 

• Front units need updating, and front of building is over 100 years old
• Front units have no stoves/ovens (they once did and were pulled, no visible gas hookups)
• Front units heated by gas, rear by electric
• Some units share utilities, not yet clear which units or utilities
• Zoned as a two-family, like most on the block, though there is a 4 or 6-unit building across the street on a larger lot

This is an ambitious project for someone with my lack of experience, but I would like to explore it further before ruling it out, as I see the potential for considerable forced appreciation and solid cash flow.  It is also part of a community typically known for extremely high end homes and good historical appreciation.

I am very analytical and detail oriented, so I'm somewhat comfortable researching specific questions as they come up, but I need some direction on the big picture.  How would you suggest I approach finding out what needs to be done to convert this to a legal 4-unit, whether the town will allow it at all, what work needs to be done (including separating utilities), and at what cost?  Can I also assume conventional loans are out of the question? If the property is off market and the owners are moving slowly, can I do most of this analysis before making an offer?  Big question, so thanks in advance.

[Brent Coombs]

@James S., I recommend proceeding AS IF the current duplex status can't change ie. The numbers need to work on THAT basis. Therefore, why would a conventional Loan be a problem?

Then, if your hopes of the City being amenable to change are dashed, you STILL come out OK.

Looks like a good experiment. Remember though, it's not a given that turning a duplex into a four-plex will automatically double it's worth. There's often good reason NOT to squeeze extra units into the same square footage. Some investors might see sense in converting it into an SFR instead!...