Row houses in town, that in some cases had been divided into 2 or 3 family homes.There are a number of ways you could go, but what do you think about buying another primary residence for you and converting your current one into a rental?

In fact it is likely less since it would have to melt or enter mixed phase to convert.

For example, a gas station is hard to convert into anything else versus say a banquet facility that could be turned into office space, a restaurant, day care, etc.

Depreciation will be based on the lower of your cost or market value at the point you converted it to rental property (i.e. the date you advertised it for rent).

Maybe you are converting them to retirement homes...LOL!

Thanks in advance for any insight on this item.I am preparing a tax return for another investor who converted her tenant to land contract.This property was purchased in 2005 for $106,000.

Is it possible to convert a>4 unit apartment house into a 4 unit?

If your tenants can not quite qualify for a loan but, have built up significant equity, you could convert the LO to a note at that point in time and sell the note to a note buyer for all cash.

If you move out in five years and convert your home to a rental, you can recover that cost through depreciation.Consult your CPA for detailed guidance.

A majority of the rentals are 1 units.What happens is one units people move a lot.With a 2 bed unit even if it's a couple with 2 kids you can put a bunk bed in there and the space is fine.With 1 units rents don't appreciate as much and the turnover frequency is very high which is probably why partly the cost are so high.Another key factor is are the utilities separately metered and billed or does the landlord have to include utilities in the rent payment.I specialize in multifamily and this is a key component and a concern for buyers.With utilities rising it can eat into future profit margins.I will also expand on the 3 to 6 months point.The lenders I know at a decent rate won't touch something at 3 months.They will want 6 months to 1 year of average rents and occupancy levels.Now in your situation you can use hard money and the points and rates will be high but you can even get rehab money built into the loan.Then you can refi once stabilized or sell off or exchange into another project.These type of value add plays we call "forced appreciation" deals.A regular bank will not touch stuff usually below 85% and some want 90% occupancy average over time.The reason is if they lend at 50% occupancy and it needs repairs the bank looks at it with risk you will not be able to turn it around and they will have to foreclose or take a big loss.Most banks unless they just opened in the last few years have a bunch of crud on their books they want to unload already.So to take down this deal you will need all cash,some partners with cash put together,or a hard money lender.In these 1 bedroom situations we look at "highest and best use".Even though it was built as one bedroom the highest and best use might be to tear down a wall between the units and convert a majority of the 1 beds to 2 bedrooms.Rent might be a little less than 2 bedrooms but you will have less turnover.Laundry is a big issue as well.If the tenant has to drive down the road to do laundry your rents will be less.If the building has a laundry facility that is on site that is better.The best and highest rents is when you put In-suite laundry in each unit.Pro-formas are CRAP.You NEVER and I mean NEVER pay on a properties potential.If the seller wants to sell based on that they need to put the hard work in.Otherwise you pay on the actual numbers going in.When you do the rehab it's important to get the city or county involved ahead of time.When updating they might require sprinkler heads,fire rated walls,etc.