SFH, duplex, or 3-unit? In Peoria, Illinois

[Robert Richardson]

Hello BP friends!

My wife and I are new landlords.  We bought a building in Peoria, Illinois about 1 year ago.  It was listed as a small 3-unit building, but was zoned as a duplex so we had to move one tenant out.  The other two stayed while we started to tackle all of the massive deferred maintenance, like new roof, windows, exterior paint, doors...  We are really struggling because of the massive amount of work needed versus the limited time we have available because we both work more than 40 hours a week.  Also, we bought a building 2 and a half hours away, so when we do get out to get some work done we have to add 5 hours of travel to our day.  Yes, I know that buying so far away was a mistake, but I think we found a good deal and it was cheap enough that we could complete it.  We were desperate to find something that we could do all cash.  

Currently we have only one tenant and they have expressed interest in renting out the whole building as a single family home. I think that this would be great for us. Renting the building as a SFH would relieve us of a lot of responsibility and free up some time, but would decrease our profit. If our tenant does want to rent the whole building, I think we should do it. We can take out a mortgage and put that money into a project closer to our home.

The empty, upstairs apartment is almost ready to list for rent, so we can start making some money again if we can find a good renter.  We would have to get the building rezoned as a 3 unit before we could rent out the studio apartment, but we have not done the work to update it yet.

I do believe that the most profitable way is to get the building zoned as a 3-unit and rent out all 3. As a duplex the building is still profitable, but as a SFH we can still make cashflow after taking out a mortgage. With our struggles due to inexperience and distance I think a SFH is our best option. Does anybody have any better advice? Thanks!!