Reverse Layout

[Eric La Pratt]

I'm looking at rehabbing a legal 4-unit on the north side of Chicago in a class A neighborhood (Lincoln Square / Ravenswood) and the top floor rear egress is in a bedroom, making the bedroom not a legal bedroom but, rather, an "office" or a "den". We'd do a large rehab (not gut but pretty darn close - all new kitchens, baths, moving a wall here and there, roof, facade, flooring, etc.) and are considering creating a reverse layout in the top unit so that we can keep it a legal 2 bedroom as opposed to a legal 1 + den. By reverse layout, I'm saying the front entrance enters into a hallway that serves the bedrooms and the rear entrance enters into a dining area or living area. In other words, the back of the home is living area (normally in the front) and the front of the home is the bedroom area (normally in the rear) but just in the top unit.

I've gone back and forth about this in my head. As a long time renter, I'm envisioning Class A renters saying, "Meh, I don't like the layout" and moving on. Because of that, I'm envisioning not being able to get top dollar rent the other floors will command given the level of rehab we'd be doing. Then there's the less quality tenant issue (unique units = unique tenants). Lastly, I'm envisioning the home not selling as quickly or for the price we're hoping for by keeping the legality of the bedroom.

Does anyone have any experience with or thoughts about this?

[Mark Ainley]

@Eric La Pratt @John WeidnerI came across this issue over the summer and was forced to do research into it...below is a paragraph out of a the email I sent the lender & buyer we were working with at the time.  I would be more than happy to refer you the appraiser that helped me with this research who has his own firm located out of Lincoln Park.  Our issue we had was with a building that had a modern floorplan and the master bedroom was in the rear with the back door.  The appraiser in this case was trying to say it was only a one bedroom and he was not counting the 20x15 master bedroom in the rear which truly was the highlight of the apartment.

"According to ANSI(American National Standards Institute) the definition of a bedroom is a dedicated room off of a common hallway. A real estate agent would view this as a bedroom, a tenant would view this as a bedroom, a buyer would view this as a bedroom, and it would be up to the appraiser to decide based on the market views if this should be valued as a bedroom. In speaking with an appraiser associate today he said anyone that appraises properties in Chicago, especially the north side, this is a common road they cross often where it is at the sole discretion of the appraiser based on what he feels the market views in that particular case is. The appraiser saw the bedroom being used as a bedroom and sees the rent at the rate it is at. What is that walk like a duck analogy?"

The appraisal was ultimately adjusted and we were able to get the value we needed.