Adding a fourth unit to a 3 family

3 Replies

I’m in CT and just bought a 4 family house that was operating as a 3 family. The owner had converted one of the floors (that had 2 units in it originally) into a single unit. It is still listed as a 4 family on the field card but the agent listed it as a 3 family and the appraiser also appraised it as a 3 family. I want to bring it back to a 4 family and Refi it. How much more value will adding a unit add to the house? I won’t be adding additional sq footage- so it would just be dividing up that one converted floor and bring it back to its original floor plan.

@Julie N. it comes down to rent value. How much rent is the unit getting now, versus what will it get when converted back to two spaces? Most appraisals for multifamily include the income approach to value, so you can estimate how much value it will add.

Definitely another studio or one bedroom will net 800-1000 dollars more. From what i have been seeing the rents are there. 

@Julie N.

Hi Julie  for the most part it all comes down to which method (operating as a triplex or as a fourplex) is producing more rents/income. Did the previous owner combine two units into one because that larger unit would rent for more?

For example, if the property, as a triplex, is producing $2,000 a month, and as a fourplex, would only produce $1,700, why go through the hassle of converting back. The previous owner also may have combined the two units into one due to it having an awkward layout/floor plan. Be sure to take that into consideration as well.  

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