URGENT Help Needed! Buying a triplex in Philadelphia classified as two family dwelling

11 Replies

Bigger Pocket community, 

I am due to close on a house in two days.  The triplex (house having 3 one bedroom apartments) is zoned RM-1 but only classified as a two family dwelling.  Will this present any real issues? Should I try to get out of the deal? 

-Clarence

My input..

1. Is it a financed deal by a bank? They may have an issue with that.

2. My strategy would be to only buy if there were 3 split meters of gas and electric. Since i'm an out of state investor I want to stay far away from units that dont have split utilities since i'd rather collect rent rather than utilities. Some guys who are local to the units might not mind dealing with collecting and figuring out utilities, but there is sometimes a service that will read independent sub meters and bill your tenants accordingly.

3. Is this a deal of a lifetime? If not, then I would keep looking

I recently purchased a triplex that was classified as a duplex. Apparently a previous owner split one of the larger units into 2 and had the gas company also split the gas, but could not do so for the electric. When i purchased I called into the utilities/city to see how feasible it would be to install a 3rd meter, but i had issues with both of them. The city said it was designated as a duplex even though the wall framing in between were all done back when lathe and plaster was common which meant I could possibly get it grandfathered in. Next, the power company required a 400 amp upgrade (cant remember) to the electrical which required spending 15k+ just to do so.  I ended up converting this to a duplex to create larger units and hopefully fill it with longer term tenants.

Originally posted by @Alex M. :

My input..

1. Is it a financed deal by a bank? They may have an issue with that.

2. My strategy would be to only buy if there were 3 split meters of gas and electric. Since i'm an out of state investor I want to stay far away from units that dont have split utilities since i'd rather collect rent rather than utilities. Some guys who are local to the units might not mind dealing with collecting and figuring out utilities, but there is sometimes a service that will read independent sub meters and bill your tenants accordingly.

3. Is this a deal of a lifetime? If not, then I would keep looking

I recently purchased a triplex that was classified as a duplex. Apparently a previous owner split one of the larger units into 2 and had the gas company also split the gas, but could not do so for the electric. When i purchased I called into the utilities/city to see how feasible it would be to install a 3rd meter, but i had issues with both of them. The city said it was designated as a duplex even though the wall framing in between were all done back when lathe and plaster was common which meant I could possibly get it grandfathered in. Next, the power company required a 400 amp upgrade (cant remember) to the electrical which required spending 15k+ just to do so.  I ended up converting this to a duplex to create larger units and hopefully fill it with longer term tenants.

1. This deal is financed but has been through the entire appraisal process which showed no issues.

2. The utilities are not split but I knew that going into the deal. I was planning on just controlling the heating and cool and paying for utilities. This home is near a college campus so I figured utilities being included is something typical to college students.

3. This is only the 2nd home which I am purchasing, but from my limited knowledge it shows good cash flow and potential for good appreciation as well. I plan to buy and hold. 

Originally posted by @Clarence Smith :

2. The utilities are not split but I knew that going into the deal. I was planning on just controlling the heating and cool and paying for utilities. This home is near a college campus so I figured utilities being included is something typical to college students.

 Have you accounted for all of these costs in you analysis? This is a huge red flag for most unless you have a good strategy for handling it. 

Originally posted by @Alex M. :
Originally posted by @Clarence Smith:

2. The utilities are not split but I knew that going into the deal. I was planning on just controlling the heating and cool and paying for utilities. This home is near a college campus so I figured utilities being included is something typical to college students.

 Have you accounted for all of these costs in you analysis? This is a huge red flag for most unless you have a good strategy for handling it. 

As many cost as I could foresee. I had the seller send utility bills (of all the utilties) from various months throughout the year. With the bills considered, it seemed to be able to offer good cash flow. (~$600).

-Clarence

Hi Clearance,

As long as the property is zoned currently in this case RM-1 which is multifamily vs. RTA-1 (for two family dwelling) per the new zone destination you should be fine.  A property can be legally zoned as a triplex but used as a duplex.  It is when the property is used the other way, legally zoned as a duplex and you use it has a triplex is when you would get in trouble.

Originally posted by @Paulette Midgette :

Hi Clearance,

As long as the property is zoned currently in this case RM-1 which is multifamily vs. RTA-1 (for two family dwelling) per the new zone destination you should be fine.  A property can be legally zoned as a triplex but used as a duplex.  It is when the property is used the other way, legally zoned as a duplex and you use it has a triplex is when you would get in trouble.

 Thanx so much. That makes sense. I may just be having trouble understanding what the zoning codes mean. 

I once purchased a Philly duplex that was originally zoned as a duplex plus a commercial shop. You can go to Philadelphia zoning in the Municipal building before you get your rental license to get your zoning fixed. As long as the zone it currently is in now is capable of being a triplex.

A couple things I'd consider are: 

* Use the Philly zoning beta website to see what the current use/occupancy is http://www.phila.gov/zoningarchive/

* Let's say the current use is duplex.  RM1 zoning is good, but you need a certain lot size to do an over-the-counter conversion from 2 units to 3.  You need 1080 feet to get 3 units.  Here is my cheat sheet hope it helps: