Help with turning a Triplex into a duplex

[Alex Hoang]

Hello BP,

I currently have triplex under contract in Covington, Northern Kentucky. It a 3 story building (the top floor is the attic) where each floor is its own 1B1B unit. I am planning out my rehab but turning a triplex into a duplex is more complicated than I thought. Let me explain:

Background: At one point, this was clearly a single family home and was converted into a triplex and registered as one. It has been grandfathered in and currently is allowed to be an operating, non-conforming triplex. It is a full gut rehab. I plan to BRRR it. I estimate that I can rent the first 2 units at $650 each, and the 3rd at $500. Estimated Cash flow $650 after refinance. If I convert into a duplex, it would consist of one large 1B1B and one 3B2B with estimated cash flow of $550-650

Why I want to change into a duplex? maybe SFH? 1) triplexes are rarer in this area and are hard to find good comps. the comps are all over the place. Duplexes have more reliable comps and I can more predictably refinance. SFH probably have the best comps and arguably more equity but comes at a cost of lower cash flow and few doors. 2) the top floor is an "economy 1B1B" as was an attic and is less appealing. 3) the whole building does not have HVAC and to bring to modern standards, 3 HVACs sounds $$$. 4) Don't have to remodel a 3rd kitchen.

Problems of changing to a duplex? 1) since this was grandfathered in as a non conforming duplex, I will have to make a change of use. This puts me in a grey zone of code where I am "more conforming" and have to make several but not all adjustments to bring to code i.e. put egress from 2nd unit, put smoke detectors everywhere. The city is pretty vague and I run into the problem of having a lot more rehab after inspection 2) I will have to submit new permits for approval for the conversion 3) I lose one more door and possibly more cash flow, but the 3B2B will be more appealing to long-term tenants.

Has anyone ever done this and ran into any problems? Is this worth the hassle? Should my contractor be aware of all the codes necessary for the change? should I just keep it a triplex? or Just convert it to an SFH. I would love to hear your thoughts.

Thank you in advanced,