2 bd or 3 bd - Single Family Rental

[Christopher Boggs]

My investment group just picked up our first rental property. It is 1200 sqft bungalow 2 bd, 1 ba single family on the east side of Cleveland, OH. The rental comp research we did determined we will get approximately $850 to $925 a month in rent.

The house currently has 2 bedrooms. The 1st floor has 1 bedroom and 1 bathroom. Currently the 2bd floor is an open floor plan. Which makes it only 1 bedroom, and there is no door to the stairs. With the way it is set up now it would be very easy to put up two 6' walls/doors and make the second floor 2 separate bedrooms. These potential bedrooms would be 8' x 10' and 10' x 12', and both would have adequate closet space.

We plan to keep this as a long term rental property. Would changing this to a 3 bedroom house vs a 2 bedroom house be a good long term move, or is having a 2 large bedrooms better? We are obviously looking to get higher rents, and make the property more appealing to tenants.

[Mark H.]

I'd be really careful about "converting" bedrooms - if you do it properly, you're going to need permits & licensed tradespeople - each bedroom needs Hvac supply & returns, the walls will need outlets & you would probably need windows big enough for "egress" in both bedrooms. To do it right & safely isn't a weekend project, and if this is a long-term hold, you've got years to have a problem pop up. work done without a permit doesn't add any value at resale, and you don't want tenants thinking they have a "stick" to beat you with.

I'd go back into those rental comps & see how long they were on the market before they were leased - in some areas, a 2 bedroom might be a pain to rent, in my area, they rent fast. To be honest, I'd have been all over that data before writing an offer. If you *need* 3 bedrooms, legal conversion costs should have already been figured up.

If this is really a long-term business for you, you need to run it like a business. Get all the data & don't take any shortcuts - they will backfire on you.