Rental Property Investor · Providence, RI · Member since 2021 · 2 posts · 0 votes
Hello,
I purchased my first property this time last year. It is currently a 2 family however there is a walk up attack and a very high ceil basement. The basement has its own door that is on the side of the home, I mention this as it could be its own entrance for the unit. I’m unsure how to get this started and if it’s even legal. I honestly don’t have an idea on how much the whole project would cost however I do know that it has the potential to make about $1,000 a month as a rental unit. I am wondering if I should consider adding a unit either to the basement and/or attack. If so, how do I get this started?
I am in the process of trying to figure out my next move as a real estate investor. My current LTV is 93% as this is a FHA loan. My thoughts are adding a unit will bring up the value therefore lower my LTV and give me the opportunity to get another FHA loan or take out a HELOC against the property to purchase my second multi family.
@Angelika Mercado this is a fabulous way to add value to your property! You are going to want to start by speaking with your local Code Enforcement department. They are going to check the zoning district that your property is located in to determine if a 3-family use (multi-family) is allowed in that district. Assuming that it is, they will then check some dimensional requirements to make sure that you can add a third unit. This may be minimum lot sq.ft. per unit, etc... From there, they will tell you either yes, you can add a unit or no you can't. If they say yes, ask them if you will need a sprinkler system in the third unit that add. Some municipalities enforce this and if they require it then that will want to be a big expense that you take into account. From there, I would talk to an Architect and/or a contractor to design the project and start getting quotes. The way that I see it is, even if you spend $50k and the result is $1,000 per month in cash flow, that is a pretty good return - and that doesn't take into account the $X amount of value that you create in forced appreciation.
@Dan Weber Great, thanks for the information. I'll have to reach out to my locals to get that started. I took a real estate class in my state to get educated more on real estate. If I recall correctly they only require 4+ units to have sprinkler systems so that may just workout! Are there any ways to fund this type of project? My guess is since I currently have such a high LTV I am going to have to come out of pocket for all of this.