Converting Single Family into a Duplex. Help with the numbers.

[Cassidy Burns]

Hi BP,

So I have an opportunity and am trying to decide what the best use for the space would be.  Below are some of the numbers, I'd appreciate any advice on how to go about the conversion and also which scenario looks best.

Single Family Home.  206 Chestnut St. 

-4 bed 2 bath

-2 kitchens

-3 levels

-Asking Price: $49,900

-Appraised Value $61,300

-Has a commercial garage that is  being rented on the back of the house by a plumbing company.  Company has occupied for 12 years.  $500/month.

Renovations Required:

-Paint

-Update Flooring

-Deep Clean

-New Fixtures (Fans, lights)

Capital Expenditures: 

-New Roof (2 years old)

-Water heater replaced 3 years ago

-Updated electric.  Baseboard Electric Heat.

-No A/C

My question is what would be teh best use for the space.  It can be converted to a Duplex if I desired to.  I have a Duplex that is down the street collecting

-Unit #1: $510

-Unit #2: $510

I think safe numbers for this home would be: Could be higher 

-Unit #1: $450

-Unit #2: $450

The Single Family Home could rent for : 

-$650/month

My biggest concern is the Sale after I hold for 5 years.  The Duplex Comps would probably only go for $60,000 based on the current market but there are 3 houses on the same block that have sold for $90,000 in the past year.

So Final Numbers: 

Single Family: $650 + $500= $1,150

Duplex:  $450 + $450 + $500= $1,400.

Which would you do?

[Garrett Hogan]

Have you researched the process to convert a single family home to a duplex in your municipality? I would start at the building department and then contact a zoning attorney for more info. 

In my market in Boston, converting a single family to a 2 family requires a 6-9 month zoning process, community meetings, many thousands of dollars in attorneys and architect/engineering fees all with no guarantee that it will actually happen. There are many regulations that you may need to comply with, lot size, parking requirements, egress etc. 

I just recently went thru this process to convert a 2 family into a 3 family. It took 7 months and cost about $15-16k. 

Also in regards to the resale value, I would go with whatever potential buyers in that neighborhood would value more. If the answer is duplex and its soley a rental property, then future investor buyers are just going to cap it out to determine the value. Aside from that, a retail buyer could do a house hack with a duplex and that could increase the value.