SFR conversion into duplex?

Buying & Selling Real Estate
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SFR conversion into duplex?

Steve Kuzmer
Investor · Tacoma, WA · Member since 2016 · 6 posts · 0 votes
Hi BP friends. I have an idea to throw out there and get some feedback on. I am in the Tacoma / Puyallup Washington market and we are facing a rental shortage in my area. Rents seem to be moving up apartment complexes are taking deposits just to get on a waiting list. Anything that becomes available is usually gone within 24 to 48 hours. My idea is to buy a small single-family house in the $150k to $200k range and add a duplex on it. Most of these houses are about 900sqft. We would gut it down to four walls add a second floor and a second unit onto the back, making it a very nice duplex. I still have to meet with a GC to develop a billing plan and estimated construction costs. I would like to develop a design I can use from project to project. My rough idea is $200k in costs bringing total property cost to $350 with a min 70% LTV. Rents would be in the $1550 each unit range. I still have a lot of questions to ask and get answered. What do you think about this idea and any one out there with this type of project experience?
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Aaron Miley
Investor · North Port, FL · Member since 2016 · 137 posts · 58 votes
10y

As much as it doesn't fit the 1% rule, if the math works out and your initial estimates are very conservative, why not. That being said, from a financials standpoint, make sure you're getting a good deal on the initial buy. Especially if you're adding large structure, that can balloon from the estimates very quickly.

Also, be sure the lot size is large enough for your county's build rules. In my county, you can build on 75% of  your land, beyond that the county won't approve permits.

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  • Tom G.
    Investor · Olympia, WA · Member since 2015 · 97 posts · 31 votes
    10y
    I have done it successfully several times. Creating a template design would be difficult unless the base structures were always the same. The design part is not difficult or expensive.
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  • Account Closed
    Rental Property Investor · North Conway, NH · Member since 2016 · 69 posts · 16 votes
    10y
    To me it doesn't seem like a good deal if you're going to spend $350,000 on a home and only gross $3100 monthly. It doesn't take much for rehabs to go over budget either.
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  • Aaron Miley
    Investor · North Port, FL · Member since 2016 · 137 posts · 58 votes
    10y

    As much as it doesn't fit the 1% rule, if the math works out and your initial estimates are very conservative, why not. That being said, from a financials standpoint, make sure you're getting a good deal on the initial buy. Especially if you're adding large structure, that can balloon from the estimates very quickly.

    Also, be sure the lot size is large enough for your county's build rules. In my county, you can build on 75% of  your land, beyond that the county won't approve permits.

    2Reply
  • Alex Chin
    Seattle, WA · Member since 2015 · 500 posts · 243 votes
    10y

    I would think that one of the biggest issues you would run into would be zoning. Gotta make sure that county permits multifamily on the lot, it can be troublesome to move from residential to multifamily, although they usually don't have a problem going the other way.

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  • Aaron Miley
    Investor · North Port, FL · Member since 2016 · 137 posts · 58 votes
    10y

    @Alex Chin Are there zoning issues with MF if it's under 5 units?

    EDIT: Answered my own question.

    Pierce County
    http://www.codepublishing.com/WA/PierceCounty/html...

    King County
    http://www.kingcounty.gov/council/legislation/kc_c...

    So yes, check what the property is zoned for, if it's SFR only then you're boned unless you can get it rezoned but I'm unfamiliar with that process.

    0Reply
  • Ryland Taniguchi
    San Francisco, CA · Member since 2015 · 786 posts · 717 votes
    10y
    Originally posted by @Steve Kuzmer:

    Hi BP friends. I have an idea to throw out there and get some feedback on. I am in the Tacoma / Puyallup Washington market and we are facing a rental shortage in my area. Rents seem to be moving up apartment complexes are taking deposits just to get on a waiting list. Anything that becomes available is usually gone within 24 to 48 hours.

    My idea is to buy a small single-family house in the $150k to $200k range and add a duplex on it. Most of these houses are about 900sqft. We would gut it down to four walls add a second floor and a second unit onto the back, making it a very nice duplex.

    I still have to meet with a GC to develop a billing plan and estimated construction costs. I would like to develop a design I can use from project to project. My rough idea is $200k in costs bringing total property cost to $350 with a min 70% LTV. Rents would be in the $1550 each unit range.

    I still have a lot of questions to ask and get answered. What do you think about this idea and any one out there with this type of project experience?

    The problem you'll run into is very simple... Zoning. Single family houses are usually not going to be zoned for duplexes. Not saying you can't find the right project but there are more options if you look for SFR homes that you can subdivide and build another house on it.

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