Turning 2 Bd units into 1 Bd units Multifamily Value Add

[Matthew McMenamin]

I'm hoping somebody can weigh in on my idea to turn 2bd units into 1 bd units.

I'm looking at an 82 unit apartment complex. 22 1-beds, 44 2-beds, and 16 2-beds with W/D hookups. 1 bedroom units rent significantly higher per sq ft than 2 bedroom units. I'm thinking about taking 15 2-bed units with W/D hookups and turning them into 20 1-bed units. (three 2-bed units turns into four 1-bed units). Since all units are currently 1 bathroom, I would repurpose the W/D lines for plumbing.

I would capture a roughly $25,000 bump in rent, equating to a $350,000 increase in value based on a 7% cap.

1. I'm not sure this can even be done. Adding an additional kitchen sink, bathroom sink, toilet, and shower might be too much for the existing plumbing infrastructure. 

2. I am also unsure what the development spread would be. For an increase in value of $350,000, I would probably end up spending $350,000 (or more). Even if its relatively affordable, this seems like a large undertaking for not a huge gain. 

I'm curious if anyone has ever done this. Trying to think outside the box and find ways to add value.