SFR conversion into duplex?

[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?

[Aaron Miley]

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.