Making SFHs into duplexes- good idea or not?

[Travis Kemper]

Hey all, I am just looking for opinions, experience, etc. on an idea (which I am sure is not an original idea in this group). My wife, brother and I have been looking to start investing in rental homes. We have been looking at multifamily homes in the Phoenix area for the last 5 months, have made maybe 30 offers, but are still just building our cash reserves. Yesterday I had an idea sparked by a recent podcast and a conversation with a BP member. I looked for mislabeled SFHs that may have some type of apartment on premises, but be labeled on the MLS as a single family home. We are going to look at this particular property tonight and will very likely be submitting a bid. It is in a good/ up and coming area close to where Ben Leybovich posted about purchasing a 117 unit complex just a few days ago. In looking at the area and the pictures, this property is a good deal nicer than any of the small multifamily properties in the valley, and it is also cheaper than most of the rundown duplexes in the area. I'm sure I am jumping the gun getting excited here, but this got me thinking:

Does anyone buy bigger multifamily properties that may or may not have a garage and remodel them into a duplex for bigger returns?  What are the pros and cons of such a project?  It just seems like it may be a good way to increase profitability and attract better tenants as the neighborhoods, at least in this area, are much nicer where the SFHs are than where most duplex/tri/quads are.

I appreciate any advice/ experience/ thoughts. 

-Travis

[Ryan Swan]

@Travis Kemper it's good that you're thinking outside of the box in this competitive market. 

The strategy would work better if it were your primary residence, but it becomes more difficult if you're trying to convert a SFH to a true two-tenant duplex.

1) You'd must likely be violating zoning (Unless area was zoned MF), so you'd have to hope the conversion flies under the radar.

2) Utilities is the biggest hurdle, as a SFH only has one water, electric, and gas meter. It's possible but not easy to have APS/SRP install a second meter...it's more difficult to have SW Gas install a second meter. If you can't separate utilities, then the "main" original part of the house would be paying the smaller units utilities.

3) Fairly splitting the parking and yard space is another issue that comes to mind