Is it worth Turning Duplex into Quadplex?

Question

I have the opportunity to buy a duplex where both units have 2bed 1ba upstairs and 1bed 1ba downstairs. The downstairs has its own walkout basement, kitchen, living room, and thermostat.

Would it be better to meter the downstairs separately and turn it into a quadplex or just rent it out as a normal duplex with each unit having 2 kitchens?

William Powell · Answer

Can it be rezoned? If so, the process is pretty straightforward. You apply to the zoning commission and at the next meeting, the council would bring up the request and approve it. Assuming no one disputes the rezoning.

Kaiston Terry · Answer

Thanks so much for the advice! I did some research on the zoning and they only allow up to a duplex so it is not legal to meter or operate it as a quadplex.

Edward Dean · Answer

Like Stephanie said, check your zoning to make sure it is doable. The separate metering is great if you can do it but there are solutions if you cannot such as using the RUBS (Ratio Utility Billing System) method to split the utility bills among the tenants. You could also include utilities in the rent and charge a higher rent to cover the difference. Either way, installing leak detectors is a good idea, preferably ones that can alert you electronically if there is a leak or a big spike in usage, especially if the tenants are not paying the utilities.

Ultimately this is a money question. Check the rental amounts in the area to see what you should expect as additional revenue once the basements are finished (you can use services like Rentometer for this) and then get several bids to price out the renovation jobs to do the splits. If after that you feel like you are getting a good return versus just leaving it as it is (and you are legally allowed to do the additional units), then go for it. You can consider both the increase in revenue through the additional rents as well as the forced appreciation since now you will have four units versus two. If the increase in rent is large enough, you may even be able to refi some money back out once you are finished and still cash flow the same or more than you do right now.

Best of luck!

Kaiston Terry · Answer

So the property is advertised as a duplex since the bottom units are not metered separately from the top. So in total the house has 2 sides where each side has 2bed 1ba upstairs and each side has 1bed 1ba downstairs with kitchens in both top and bottom.

The problem is that the bottom units are metered with the top units so i could rent it as 4 separate units but then basement units would be in same utilities as top units.

Stephanie P. · Answer

Wouldn't the basement be one unit making a total of 3?

it wouldn't make sense to have a property with 2 kitchens unless you're on the east coast where they have "summer" kitchens in the basement.

Zoning, zoning, zoning.  If it's zoned for more units, get as many as you can although look at the numbers to see if cutting up the basement would improve cash flow after expenses or if leaving it alone would get higher rent.

Make sure you don't create internal obsolescence.  It's an appraisal term that means the property doesn't flow well; like if a hallway doesn't lead to anywhere or if you have to go through a bedroom to get to the kitchen.