What do I need to consider when adding a kitchen?

[Tyler Warlow]

Good morning everyone! My name is Tyler Warlow! I am trying to find a house that I can convert into a duplex so that I can rent out one side and live in the other. I realized that one of the things that I would need to do to many of the properties that have peaked my interest is convert a living space into a kitchen. Firstly, is this legal/possible to do? I've seen plenty of people add small kitchens for Air BnBs so I assume it is. Secondly, if it is possible, what must I be aware of to make sure this is done right. I want to ensure that I follow any sort of regulations and safety standards but I don't know where to even start or know how to estimate rough costs. Any advice? 

[Theresa Harris]

You need to make sure there is room on the electrical panel to add larger appliances and also plumbing is easily accessible (to keep costs down).  So if the second kitchen has the sink backing onto a wall that has plumbing on the other side (eg another kitchen or bathroom) or it can be run from the basement up.  If you want a true duplex, you'd also need to make sure zoning would allow it vs adding a legal suite.

Why not just buy an existing duplex?

[Tyler Warlow]

Hi Theresa! Thank you for the reply and advice! Unfortunately, there are very few duplexes in Raleigh and the surrounding area and the few that are available are definitely not for sale for an amount that would make sense from a numbers perspective. I've been told this is because Raleigh had zoning laws in the past that prevented building duplexes, but I would definitely need to research that more.

[Avery Heilbron]

Hi @Tyler Warlow this can be best done by buying a split level home. I'd be happy to discuss. The brokerage I work at also owns a construction company so would be happy to discuss some estimates. Really you'd need a plans, approve those plans for a permit and to get the work done of course. Feel free to PM me and I'd be happy to help

[Tyler Warlow]

@Avery Heilbron Thanks for reaching out! I would love to learn more!

[Benjamin Carver]

Tyler, I just did this myself. I have videos and much to say about this. PM and let's call - happy to answer questions and share my experience with you

[Jaron Walling]

Splitting any property into a duplex is a tall task. Financially speaking it doesn't make sense in most cases. Think about the costs to add/replace/upgrade the electrical panel? That's a $6-8k project right off the top which you'll need to for additional appliances. You could buy a distressed SFH, live-in-flip, and increasing the market value much easier. Instead of cash-flow you're creating value and saving thousands on taxes if you choice to sell.

The same can be said converting a duplex back to a SFH. We had an opportunity to buy a distressed duplex (off market) but couldn't justify the numbers. It required a full gut remodel, layout changes, and probably a second story addition. We could have done a lack luster remodel and rented to sec8 tenants but that's not our game. Lifting the distressed duplex to meet single family comps was a $150-200k project (plus the purchase). That's well outside our experience level so we passed. A year later the property sold and was gutted to studs as I predicted.

"and the few that are available are definitely not for sale for an amount that would make sense from a numbers perspective." - This challenge is why so few investors do it. In our market converting a SFH into a duplex (if even possible) can reduce the ARV. Most investors would rather tear down houses and build new construction.

[Tyler Warlow]

Thanks for your insight @Jaron Walling. I'm relatively new to this so I don't have an understanding of the financial cost of this sort of project. That's why I am reaching out here, to gain that understanding and potentially shift strategies if need be.

[Scott Mac]

Make sure your zoning allows a duplex.

Make sure you get permits for all work that is needed from the city or county.

Consider putting in a separate electrical meter, a separate water meter, and separate gas meter.

Also features that are desirable in duplex would be a separate heating system which allows the duplex part to adjust its heating and air conditioning to whatever the renter wants. As well as a separate water heater.

If you do not put in a 2nd HVAC system, pay attention to the return ducts. You want to make sure that both units have return Ducts as well as heating ducts.

Will these items raise the value of the duplex to a future buyer In that neighborhood, that is something to speak with some local real estate brokers about.

[Tyler Warlow]

Thank you @Scott Mac! I will keep these items in mind moving forward!

[Nicholas L.]

@Tyler Warlow

I'm with @Jaron Walling on this... it probably doesn't make sense.

Just find something you can house hack as is.

[Evan Polaski]

@Tyler Warlow, this really is based on market.  Like Jaron and Nicholas note, in Cincinnati, OH, duplexes are worth LESS than single family homes. This seems to be true in most markets outside of area like LA with ADUs.  

That being said, there are a lot of ways to skin a cat.  You see people add basement "rentals" fairly consistently.  There used to be a whole show on HGTV (Income Property, I believe it was called) that focused on just this.  Some people add these and call them in-law suites, if they are getting zoning pushback.  

Now, if you want a fully legal duplex, including having the property reclassified, Scott Mac offered the basic outline of steps.  I will note (but not condone) that a lot of people will build fully permitted living quarters in their basement.  While they are legal from a building department view point, if there are complaints from neighbors about you renting it long term, it could create issues with zoning.  it all comes down to the risks you are willing to take.

Back to your original question: if you have to do a full buildout of unfinished sq footage into finished livable quarters, you are likely looking at about 200ish/ sq ft.  So if you are finishing 1,000 sq ft, including adding full kitchen, bath, electrical, plumbing, etc, you will be spending about $200k in addition to the purchase price.

[Tyler Warlow]

@Evan Polaski Thank you for explaining everything. I think that the route I would have to take is likely adding an "in-law suite" rather than fully converting to a legal duplex. I have looked into multiple properties that have finished rooms but and a bathroom on each floor. The challenge I think would be finding space to give the renters their own kitchen. I was thinking of finding something with multiple rooms so I can convert one into a small kitchen/living space.

[Tony Savage]

Hey Tyler,

 I agree with Teresa, you could just buy a duplex if it's within your budget.

[Bruce Woodruff]

Like @Theresa Harris said, the electrical costs alone could be a deal-breaker. Current code requires at least 8 separate circuits for a kitchen. So you'd have to add those 8 circuits to the new kitchen, plus whatever it takes to upgrade the existing kitchen to the same (once you touch something, you have to bring it all up to current code). Plus adding 2 new main panels s about $6000 right there. 

So probably $20k minimum to do what you want to do. Do the numbers still pencil out? And bear in mind that you will have to to the rest of the interior as well. Don't forget to add permit and plans cost....