Convert a two bedroom into a one bedroom and a studio for rental?

[Melanie Middien]

Hello, 

I have a duplex (one is a two bedroom) and the second is a gutted two bedroom which I am considering turning into a one bedroom and a studio.  My gut tells me that it will be more profitable as a rental and for resale having three vs. two units... am I wrong?  

Thank you!

Melanie

[Rick Albert]

A JADU only works if the owner lives somewhere on the property. That's likely a bad idea.

If you legally convert it into a triplex, then double check with a lender because the guidelines change. There is actually a bigger pool of buyers for duplexes than triplexes because the lending guidelines are easier.

One thing to keep in mind with studios is that they may have higher turnover, which increases your vacancy costs. I've been fortunate to have the same tenants for almost two years (will be in August), but I have had clients where they get a new tenant every year.

Generally speaking, yes, if you legally convert and have three permitted units, it could increase in value. You need to see what the triplexes are selling for and compare it to the cost of actually doing the conversion. Is it going to be separately metered? Are you adding a full kitchen and bath? These things can play a role.