3Br/2Ba vs 2Br/2Ba

[Matthew Moreau]

I'm closing on a HUD foreclosure tomorrow that I will be rehabbing. It's a 3BR/1BA 1926 Bungalow in FL. I bought the property in the low 70k expecting a 40K rehab with a 145K -155K ARV.

I've debated about turning it into a 3/2 vs a 2/2 . The immediate thought is to turn it into a 3/2. DUH! 

However, a couple thoughts make me think otherwise

The home is small (1,065 SF) 3/2 standards. I would have to add the 2nd bath by enclosing a portion of a utility room that butt's up to the master bedroom. In addition, one of the 3 bedrooms is small by modern standards. 

The second point is that the area is marketable to a 2/2 buyer. It's an artsy, hipster, area that's experiencing gentrification. The reason I bring that up is that most of the people that will be purchasing in this area won't be looking to start a family. The rehabbed homes are being purchased by young urban professionals which will likely have less of a use for a 3BR. 

I pulled the comps and they were virtually the same. The after repair value came in 4K higher for the 3/2's

The question is, would you rather have a spacious 2/2 or a slightly cramped 3/2 ? What are your thoughts BP ?