Converting a living room to a bedroom: 3/2 to 4/2. Worth it?

Question

I own a 3/2 condo unit in Midtown Atlanta. Currently it has two small bedrooms that share a bath, as well as a largish master bedroom with a bath of its own. The unit also has a massive combined living room/kitchen space that is accessible to everybody.

If I were to build a single new interior wall and install a door in it, then - poof - most of that spacious living room would instantly become a fourth bedroom, and quite a large one at that. It would have broad windows, an excellent view, and a big private 12th floor balcony.

Doing this would greatly reduce the common space. Still, there would actually still be enough footage left for a common area nook with a couch, book shelf, and side table - maybe even a TV that swings down from the ceiling. Now, though, the kitchen and remaining common area would have NO windows instead of its former great view. And now no one else could get to the balcony, except by going through the new bedroom. Lastly, this puts 3 bedrooms instead of 2 sharing a single bath. (However, I could fix that last bit by turning some closet space into a narrow hallway that would make the master bath accessible to everyone.)

What I'm mainly wondering is the following: Would this change be likely to increase my rental income from the unit? And can you suggest any ballpark figure on how much? For context, my HOA requires me to rent out the unit as a whole for at least 12 months at a time, so no renting room to room, and Rentometer tells me the median rent for a 3/1.5+ condo in my area is $3000. Also worth considering is that it's on the same block as MARTA (Atlanta's subway/rail system) and just 2 blocks and one interstate bridge from GA Tech. It's an overwhelmingly 'young professionals and college kids' area of town (like 99.7% according to neighborhood scout; kids? what are those?).

So my main question is whether I can increase rent (and by how much) by turning this 3/2 into a 4/2 by cannabalizing the living room, deck, and kitchen view into a new large bedroom. I'd also love to hear any general thoughts on whether this is a good idea, or things to keep in mind while going about it.

Thanks for considering!

John Morgan · Answer

@Richard Davis It’s all a gamble. Lol. Most of my four bedrooms are small and people don’t care. They just want 4 bedrooms. And one is only 1,200 sq ft. with the garage converted. They’re my best tenants!

John Morgan · Answer

@Richard Davis In my area, 4 bedroom homes in blue collar hoods are rare. I could probably get an extra $150 or $200/month now with that extra bedroom. Almost all my 4 bedrooms have an additional family member or friend living in them. By them being able to split the rent with two or three household incomes, they aren’t house poor and take good care of my properties. 4 bedrooms are in MAJOR demand near me. All these older homes only have 2 or 3 bedroom homes, so my 4 bedrooms rent out in a nano second. And they don’t care if they’re sleeping in the garage!

John Morgan · Answer

@Richard Davis

I’ve got three garages converted into a fourth bedroom. I get an extra $100/month out of it. Not great, but not bad.

Richard Davis · Answer

@John Delano The 2nd bathroom will remain accessible to everyone. However, with or without the new room, the master bath is accessible only to the master bedroom. So unless I carve through some closet space to draw a new narrow hallway to the master bath, we’d have three bedrooms on one bathroom and one bedroom (the master) on the remaining.

John Delano · Answer

What about the second bath? Will that be accessible without going through this new bedroom?

Mason Hickman · Answer

@Richard Davis

Try calling a local property manager that focuses on student rentals and ask what their rent per room averages. If they have a decent web presence, you can probably get a good idea of a per-bedroom rate right from their website.

Richard Davis · Answer

@Mason Hickman

Definitely students and young professionals. Family rentals are very rare in this neighborhood.

I'm familiar with how to estimate rent for an entire unit (assuming it's 3 bedrooms or less), but what would you suggest for getting average rent per bed? I suppose I could divide the rent for a 3 bedroom unit by 3, and then assume a little less. Do you know a better approach?

Alexander Szikla · Answer

Depends on your market - but based on everything you've said, I would recommend it.

Just make some reasonable assumptions and do the math.

Let's say the work will cost you $20,000 and it will only provide $100 more per month (or $1,200 per year) you are deploying capital to get a 6% return. Not terrible, but not that exciting either. And may hurt your occupancy.

If you can do the work for $5,000 and it will provide you with another $400 per month ($4,800 annually) that is a 96% return which is an insane homerun!

Richard Davis · Answer

Thank you, John. You're right - I just want to gamble well. ;)

Richard Davis · Answer

@John Morgan

That's encouraging! Your post sparked me to do some simple research: I checked Zillow and Apartments.com for any 4 bedroom rental listings in my area. I found a grand total of 4 comps. The good news: the cheapest rents for $3250 (well over the $3k median for 3/2's from Rentometer), with the next cheapest at $4k. The bad news: All the comps are nicer than what I'd be offering. They have much more square footage than mine, and they each have a larger living room than mine would be left with after walling in the fourth bedroom. Still, it leaves me confident of getting at least $2500 for mine, which keeps me slightly above water level on cash flow. So it seems like this might be worth trying. If I get the $3250 + utilities, I'm doing great; if only $2500 (all-in), I'm not drowning.

Converting a living room to a bedroom: 3/2 to 4/2. Worth it?

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