First deal in the works

[JD DiGiacomandrea]

Hey all. I think I finally might have my first deal. I have been looking in the Rochester NY market for about a year now and have finally figured out that the MLS is not working for me. I found an off market deal and I think it is going to cashflow. I ran my numbers pretty conservatively and still see a $350+ per month positive cashflow. It is a duplex in a Suburb of Rochester. I have two minor bumps in the road right now and I wanted to see if anyone else had some advice on these.

First, the lot is zoned as a single family, but the duplex seems to be pretty well separated and I feel it could get rezoned pretty easily. I checked on the town code and the type of zoning it has is capable of having the dwelling changed from a single family into a dual family through a building permit process. In the mean time this is making the bank financing tricky. They state they can only underwrite the loan by calculating rent from one side of the duplex, which throws the numbers out of whack obviously. Has anybody gone through this? Are there better ways to finance this?

Secondly, the property has a pool that would be shared by both tenants. I anticipate this property to be rented to a small family with kids, and maybe a young couple on the other side. I am a bit worried about liability with the pool  in the backyard. What are some of the risks, and mitigation I should be aware of with something like this?

All advice welcome!

JD

[Mark W.]

I would proceed very cautiously when zoning is involved.  You mentioned you're in a suburb, but in the city proper once a multifamily has lost its rights (usually due to vacancy) it is nigh impossible to get them back.  I've recently combed through all the Zoning Board of Appeals documentation for the last couple of years (and I had done the same back in 2014) and in almost all cases the board denies requests to re-establish rights.  In my case I had a built-as triple zoned as a duplex, but the city wouldn't allow me to rezone it to a triplex.  In fact, I had to yank the 3rd floor kitchen, pull the 3rd gas meter, and "upgrade" the electrical to two separate service panels instead of 3.  It wasn't a bad outcome though, because I was able to add bedrooms and square footage to the 2nd floor apartment...and charge a commensurate rent.

I mention all that to suggest you should check with the town's zoning board and see if you can determine the likelihood of getting the property rezoned.  Have they granted the same relief to other similar properties recently?  What are reasons why they wouldn't?  Again, I would proceed cautiously because the last thing you want to be stuck with is an illegal duplex that loses money.

If you can solve that problem and go forward, I would remove the pool.  Pools require almost daily maintenance in the summer, and good luck getting tenants to agree on shared responsibility for it!  For a rental it doesn't add value, it adds liability...significant liability IMO.