Ideas for an Illegal triplex in Philly?

Question

I have made many mistakes but have also had lots of luck. Right now I have two single family homes and one duplex that I thought was a triplex. I didn't do my research and found out the basement was not a legal unit. I have this property rented and make about 1k profit. I bought it turn key at roughly 300k. I dont know if this was the right move but its in a booming area in West Philly. Getting a rental license for the basement isn't possible and I manage all my properties with a full time corporate job. I want to invest in real estate and leave the rat race. I'm open to suggestions on what to do next. Sell it to maybe make some profit? Or does anyone know how realistic it is to turn a duplex property into a triplex in Philly? Can a lawyer help with this? Thoughts?

Brian Cauldwell · Answer

Hi @Stephanie Cortez!

You will need to talk to the county to see if they can change the property type to a 3-unit. As far as the next steps for that property, it all depends on goals and what your next step is. If the property has to be a 2 unit, you will need to look at the numbers as a 2 unit. What does the cash flow look like, can you use the basement to supplement your rental income to one or both of the units (if a unit has access to it and it is finished, have them rent the whole space, more space usually equals more rent.), etc. This will help determine whether or not the property is a good rental property.

As far as keeping it or selling it. If it is a 2 unit, would that affect the value, and how much money could you make if you sold it? Do you need to sell it to buy the next rental or BRRRR?

I would consider all of the above and go from there.

Chris Pelc · Answer

Hey @Stephanie CortezI'm sorry that you had gotten yourself in this situation. I would definitely suggest checking out public records on your future purchases. Atlas is one of the best resources for Philly investors to check on every single potential investment. It shows all information such as permits, licenses, inspection reports, zoning, and variance information. Here is a link to that: https://atlas.phila.gov/For your particular situation, what about the basement is illegal? Lack of egress? Ceiling height too low? Square footage too small? Or is your lot square footage too small for a legal triplex? For instance, for every 360sq/ft of your lot size, you are allowed one unit. So minimum lot size should be 1,080sq/ft for a 3 unit multi. If any of those boxes are not not checked, you will have a pretty tough time with that basement as a third unit. If cash flow on a two unit is good, there is no reason to sell. If you are able to pull roughly $3k between both units, you are in a pretty good spot. Let me know if you'd like to connect to talk a little bit further about this!

Saaj Patel · Answer

Mimicking what everyone said here, seems like this is a learning point. This mistake can be avoided by using the right agent on your team. Phiadelphia is very nuanced. I would love to take a look at the address and look into other strategies. I will PM you in a minute.

Pat Hamilton · Answer

I don't think it is worth the hassle of converting.  I recently sold my nightmare 3-family home in West Philly (best day of my life!) Owning a 3 family home in West Philly has costs that I don't think a duplex would have:

- I spent thousands of dollars on a fire monitoring system

- I spent hundreds of dollars getting the annual certificate

- I also spent hundreds of dollars getting a monthly monitoring service for the fire system (this is optional)

- You need to get a public lighting account with peco and light the hallways.

- You need to pay (I think around $500) for trash/waste

- you need to clean the hallways, landscaping, snow removal

- you need to have *EXIT* signs that are wired by an electrician - this was crazy expensive!!!!!!

- Fire escape certification if you have one (you may need to get a fire escape if you don't have one)

Is your basement tenant paying rent on time?  I had a tough time evicting, even though I had my renters license and everything was in order. You may have a tough time evicting if you don't have your paperwork in order.  I would combine your first floor apt and basement apartment and make it one huge unit, and rent it that way in the future.

Alan Asriants · Answer

Getting a conversion in the city is a PIA!

I recommend converting the basement unit as an extension for the first floor and charging more rent for a larger living space, extra bathroom, finished basement space etc!

Then you will have a legal duplex without the headache of legalities!

I see this a lot

Eric Greenberg · Answer

Are you sure thats true outside of RM-1 zoning?

Eric Greenberg · Answer

Some good info in here. Been theough this process before and it can be long and costly with no idea if itll go in your favor.

What are your thoughts on being creative and renting the basement out as a room rather than a unit?

If you really want a 3-unit id talk to an architect/lawyer and seeing what could make it up to code would be a route but realize it could force you to add a sprinkler and fire monitoring system.

Kevin M. · Answer

I have experience with this personally and professionally. To legally change this in Philly you're likely looking at a multiple year battle with zoning and L&I. It of course depends on the specific of your property (zoning, available pans, layout, rent price, etc) but I would be surprised if the journey had positive ROI over a ~5 year horizon at the end. Sorry to share this negative news but it's from real world Philly experience in these situations.

Ideas for an Illegal triplex in Philly?

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