Keep property as duplex or change layout to a three unit?

Question

I purchased a 2 unit building in upstate NY in a small village where the Hospital is the major employer. My target tenants are traveling nurses and doctors who the hospital employs for 3-12 months periods of time. I have finished and rented one unit for $1500 per month, which covers my expenses. The finished unit is a two bedroom 1 and 1/2 bath two story unit.
The side I am getting ready to renovate could be easily split into a one bedroom apartment upstairs and a one bedroom apartment downstairs. These would rent for $1000 apiece. Utilities for all apartments would be separate.
I asked the local codes enforcement what would change if I did make this into a three unit and he warned me that I would be required to have a sprinkler system in all units and an alarm system. 
I could incorprate these changes into the side to be renovated, but retrofitting them into the already completed side would be more difficult.

I am looking to hear anyone's experience as to what the cost of a sprinkler sytem/ alarm system might be and if there are other incremental costs  or regulations that should be anticipated that I haven't thought of.

For the extra $500 per month income and some decrease in insurance costs, I am motivated to do this, but the regulatory hassels are less as a two unit.

What do you think?

Greg B. · Answer

Lester Schmitt I would guess that would depend on what the definition of substantial improvements is.

I renovated my 3 units with no problem from the city because they were pleased to have the eyesore taken care of.  The only reason they got involved was because I asked to split a unit.

We did some wiring updating, gas line updating, sheet rock, and painting.  It's not the neighborhood pain anymore.

Lester Schmitt · Answer

I appreciate he feedback. I had purchased the property anticipating that it would convert to a nice 3 or 4 unit. It will be fine as a duplex, but I did the first side over to get a unit rented and then was going to split the second side. Had I educated myself better, I would have done both sides simultaneously and been done sooner. 
Also, if I understand correctly, if I buy an existing 3 or 4 unit and if I make substantial renovations, I could be needing to add a sprinkler and alarm system. That would discourage someone from improving the 3 and 4 unit housing stock in a community.  Am I understanding this correctly? What level of improvements would trigger this?

Greg B. · Answer

Sorry Lester Schmitt, I didn't see this the first time around.

Yeah I wanted to split some units to go from a 3 unit building to 4 units.  City said the same thing, sprinkler system and automatic fire alarms.

I did some checking.  The sprinkler system is a complete separate water system tied to the water main.  That would mean tearing up the yard, the walls and ceilings to install it.

I pointed out that the kids would be tripping the alarm all the time and activating the sprinkler system.  Massive water damage.  The city didn't seem to have a solution for those false alarms.

I am like you.  I decided to pass.

Good luck

Mark Updegraff · Answer

Zoning!  In ROC NY i must comply w zoning regs.  A 2 fam cannot be converted to a three without city approval, which is prohibitive at best!

We don't have the sprinkler reg.

Good job on the rates!

Lester Schmitt · Answer

Well nobody seemed interested in this topic. The estimate I received to meet the code requirements of installing a sprinkler system and alarm system was $10,000-12,000 dollars. I am proceeding with a two unit renovation instead of a three unit.

Lester Schmitt