Turning a 6 plex into a 5 Plex, what cons mights there be?

3 Replies

I am currently purchasing a 6 unit complex in the heart of Tempe near the ASU campus. 4 of the units are 2/1's with the other 2 being 1/1's I'm thinking on combining the 2, 1 bedrooms unit ( the are right next to each other) and adding an additional bedroom thus creating a 3/2 which will bring in an addition 9k yearly in revenue if we kept the units as is. Am I missing anything? Is there a downside to reducing the number of doors?

Hey @Michael Ratzken , the only certain downside to reducing the number of doors that I can see is reducing your built-in diversification (both in total # units and in unit mix).  I would make the key driver this:  which is more valuable and more scarce in your market:  1/1s or 3/2s?  If there is a high enough premium on 3/2s and low supply (and at least some demand) then BOOM!  If, however, there are people lining up around the block for 1/1st and running for the hills from 3/2s then I'd call it a no-go.

1/1s are always in really high demand in Tempe (possibly the most requested unit type).

If I'm looking for a 3/2 with my friends, wouldn't we rather just get a free standing house in the Maple Ash Farmer Wilson district then rent a smaller 3/2 apartment with no covered parking or yard space?

Are you sure your math is right? Assume 1/1s rent for minimum $800/month, and a 3/2 rents for $1500-$1900. How are you getting an extra $9k/year out of a 3/2 vs renting 2x 1/1s?