Turning an older converted duplex back into SFH

Turning an older converted duplex back into SFH

Member since 2019 · 7 posts · 0 votes

Hello BP community! My wife and I found a beautiful house from the 1920's that had been converted into a non-conforming duplex back in the 1980's. It has been grandfathered in as a duplex, but we think it brings more value as a SFH. We live in a college town that has seen a huge explosion in apartment construction over the last 10 years and a general tightening of the SFH inventory. These factors combined have contributed to a situation where rents are low for 2/1 units and SFH prices are high for 3/2 or 4/2 houses.

The house itself needs some general work, and I am comfortable estimating the costs on that work, but I am not sure what it would cost to turn it back into a SFH. The house currently has 2 of all the utilities (HVAC - 15 years old, electric - 2 100amp panels, gas, water).

First of all, for people who have done this in the past, did you take out the duplicate of everything so that there was only 1 HVAC system and 1 of each of the meters? What needs to be taken out and what can simply be capped? Do you remember what the cost was for that general conversion? 

Finally, were there any issues that were unique to this type of conversion? The entrances aren't an issue with this property, we are working on financing for this specific situation, and we are checking with zoning to make sure the conversion is doable. Otherwise, I am wondering if there are things that I am missing. 

Thank you so much for your help! Please let me know if I am leaving out any necessary details!

Bryan
 

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  • Investor · Atlanta, GA · Member since 2020 · 62 posts · 27 votes
    6y

    Hi Bryan,

    Just make sure that the numbers make sense to split it back out.  While the sfh home rents may be higher you'd be getting two rents for the duplex as opposed to one - and there's all the work you'd have to do to turn it into a sfh.

    Check out the BP Money podcast episode 100 with Brandon Turner.  Towards the end they ask him one money mistake that he regretted and it was actually when he took a duplex and converted it into a sfh to flip.  He ended up breaking even on the flip and said that he would've made more if he kept it as a duplex.

    Best,

    Paul

  • Member since 2019 · 7 posts · 0 votes
    6y


    @Paul Wachtler Thank you for the recommendation! I'll check out the podcast and make sure to think through the consequences of having just 1 unit vs 2 units. 

  • Specialist · Los Angeles, CA · Member since 2016 · 61 posts · 32 votes
    6y

    Is this a fix and flip, or a hold? If it’s a hold, in a college town, anywhere near the campus, the duplex seems to make more sense. 

    It took three of us to cover rent and utilities in a sfh when I was in college, and that was twenty plus years ago.

  • Member since 2019 · 7 posts · 0 votes
    6y

    @Kenneth Bullock Honestly, we would like to keep our options open. The duplex is in an area where almost every other house is getting flipped or rehabbed and rented out. It is in a newly designated, "Arts" district with a few new restaurants/breweries, art galleries, etc. We plan on living in it for about two years, then move on to another property. By that point, we (and our real estate agent) believe that the area will be even more desirable, so it could work well to sell it at that point. But, I do want to make sure it still works as a rental if the market takes a big dive. If we were to rent it as a duplex with basic rehab (probably around $165,000 all-in purchase + rehab), we could probably get around $750 for each unit. They currently rent for $650 a month and they aren't in great condition. If we were to turn it into a SFH (probably around $180,000 all-in purchase + rehab), we could get $1,600-$1,700 a month for it. ARV as a SFH should be between $215,000 - $225,000, depending on finishes. Our real estate agent believes that it should easily get around $250,000 in a few years (although I take most predictions with a grain of salt).

    At this point, my gut says that unless something major comes up for the estimates on the conversion, we will probably convert it and plan on selling in a few years. Does this sound reasonable, or are we relying too much on "potential" appreciation? 

  • Adam TafelBusiness Member
    Real Estate Agent · St. Paul, MN · Member since 2017 · 575 posts · 395 votes
    6y

    Bryan,

    I'm currently helping a client who did this the WRONG way. Opposite scenario, converting a SF into Duplex. The proper permits were not pulled, zoning/inspection issues were a second thought. If you walked into the place you'd think it was a no-brainer, legal duplex. Now she's forced to occupy indefinitely. I realize this is a different scenario, and that you (probably) have much more foresight than my client. Just double and triple check with EVERY city department before taking on the project.  

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