Help Requested: 1 Bedroom vs 2 Bedroom

[Zack Klesch]

Hello Good People of BiggerPockets MN, 

I am in need of some advice on what to do as I leave my first house hack on move on to the second, the basic situation is that I currently live in a one bedroom (legally two but one is basically a small office) place that is likely a little too big for a single person and I'm wondering if I should convert it into a two bedroom before I leave. The details of my situation are as follows: 

1. I live in a good spot in NE Minneapolis with privacy and a yard that I would consider 10/10 

2. The lower unit is a 3 bedroom that currently rents for $1550 / month 

3. The upper unit has somewhere around 900+ sq feet and has a recently renovated kitchen which I was able to do while living here

4. A picture is attached of the current / proposed layout (I'm not artist)

My predicament is that I want to maximize my rent but I'm not sure if it will justify the addition of a wall with a door, the removal of a current door and the replacement of that door with some wall, the enlarging of window to make it meet egress standards (not positive on this one but I think I have to do this), and the removal of a closet to make a section for a door. My biggest issue is that I can't seem to find similar comps, since it seems like I'm finding places I would consider "better" than mine (on Craigslist) that are renting for a few hundred dollars less. So I'm wondering if I got lucky, if everyone else isn't keeping up with market rent, or if my yard is an "intangible" thing that really is bumping up the price. In essence I'm mulling over the decision on whether or not the work will increase the rent enough to justify it. I wanted to exit this place ASAP and start on the next, but I think this would delay my plans a little bit. 

Any expert insight on my situation would be greatly appreciated. 

[Mike Moe]

Hey Zack- I'll shoot you a PM. With some more info I can help you pull some rental comps. In my experience if you can reasonably go from a 1x1 to a 2x1 it is almost always worth it. Once you have your estimate to complete the work and the projected rental increase, you can easily estimate your return on that. For example if the rehab is going to cost you $20k, and you are going to get $250 more a month in rent, you know that is going to be a 15% return on that $20k (($250 a month X12) /$20k rehab)). You also get your payback period...6.6 years in this case. Obviously $20k is not an estimate, just a round number for the example :).