Providence Rhode Island duplex conversion to triplex

12 Replies

I found an up/down duplex in Providence Rhode Island that is less than a decade old and as far as I can tell in great shape. I did an analysis using the BP rental calculator and determined it only makes sense to buy if I can convert the basement into a third unit, this will obviously add rental income and I believe it will add value to the property. I toured the property and think the physical aspects of doing this are possible.  There is a regular walkout door on one side of the unit, a staircase that leads up to the main entry/exit point on the other end of the unit, high enough ceilings, and plenty of standard windows along one side of the basement.  My plan was to use a 203k loan to buy the property and fund the rehab cost of adding the basement unit.

I'm interested to know if anyone has created value by adding a unit to a property in Providence and if so, what was the experience like? I went to the city hall and found out it is zoned R3 which I guess is the first step towards making it possible to convert to a 3 family. The next step is where I get a little lost. I was given an application for variance/or special use permit that I will be reviewing shortly and also told I would have to hold a meeting to see if anyone in the neighborhood objects to my conversion plan. I was also told that 3 family homes require sprinkler systems to be installed in the entire building.

So my next step is to review the application for variance permit and determine the extra cost of installing a sprinkler system. If anyone has any experience in doing something like this can you give me some feedback on whether or not its worth it or think its even reasonably possible. 

This would be my first deal. I'm excited to start investing and want to do something that adds value to a property but I am a little nervous about the legality/possibility of doing this as well as the extra costs from applications and fees that I might not be aware of, and the sprinkler system installation cost.

@Sean Doherty Congrats on finding a place to consider. I am still looking myself. I am not a pro so anything I say may be wrong :)

I picked up in another thread that converting a basement may be against code in some areas. Not sure if it is in your area but maybe something you want to dig into a bit deeper. I hope for you that is not the case as it sounds like the sprinkler system will be enough of a pain. 

The other thing of note and I hope to hear from others but I think you can only use the 203K if you plan to reside in the property. If not, you may have to look at the HomeStyle FNMA loan instead. The HomeStyle loan does not require your residency in the property.

Good luck and I hope this works out for you!

Thanks @James Dickens   for the response. I forgot to mention part of my plan was to live in the one unoccupied unit while I added the basement unit then move to the basement unit once I finished it. I'll definitely be looking into making sure it is legal and up to code.

Good luck with your search!

@Sean Doherty I believe sprinklers are only required for 4 family and above but since the building is less than 10 years old it may be different but I wouldn't think so.  I don't have any personal experience with the change of occupancy but I have heard of people finding it difficult to navigate the city process.  It would be good to find someone who has done it before and may be able to provide you direct info on how to go about.  

I've done a 203k myself so if you have any questions about the loan, feel free to PM me.  Good luck! 

@Christian Allen Thanks for the info. Im going to keep looking into that property but am also still looking for other deals that I can use a 203k loan on.

@Sean Doherty unfortunately I have not done it either, but I know it is an uphill battle, it's not impossible but the general rule is that if you want to downsize (turn a 4 family into a 3) it's easy, if you want to add a unit it's more difficult, and I know a lot of inspectors really don't like basement units so they are tough on permits & inspections.

Like @Christian Allen I usually only encounter sprinklers on higher #s of units. However if you are changing occupancy and adding a unit (a "change in intensity of use") they may require you to conform to new/current code which may be where the sprinklers for a 3-family would come into play. (Similarly, if you were to build a new 3 family you might find the same requirement - same idea.)

I know one aspect to look at right off the bat, before you spend a lot of time and money, is whether the lot size is sufficient for the extra unit. This is true in a general total-square-footage sense, as well as specific required dimensions and setbacks. Also beside this you will need to have room for an adequate # of parking spaces, possibly for bicycles as well. Again, when you want to change the use they require you to meet new requirements that existing buildings don't.

You can poke around the Providence zoning regulations though you may find you come up with more questions than answers as the sections overlap each other and their exceptions often have exceptions. Still, it's a good place to start and will help you ask intelligent questions of the city officials you speak with.

I wouldn't say it's impossible but I would make sure you can float the property for at least a year and possibly two - in other words, that you don't need to have this third unit to make your #s work and your mortgage be viable.

As a general rule, it's nice to look for value-add opportunities like this but nothing is certain when dealing with government so it should be gravy/nice-to-have. The deal should also work on its own, even if you get denied on your proposed project. It should be a "good" deal on its own, even if the possibility of making it a "great" deal through a change in use is exciting and worth getting involved in it.

All that said, it's very possible there are some folks in a local real estate investment group like RIREIG who have done exactly what you're proposing - I can think of a couple of folks who would be likely prospects actually. So it may also be worth attending a local group and posing your question there.

There are 2 things that you'll need to conform with to do a 2 family to 3 family conversion:

1) Zoning ordinance (mainly: is the lot big enough and do you have enough parking)

2) Building code (mainly: do you need sprinklers, do you have the required fire ratings between each of the units, do you have hardwired smoke/co detectors, do you have the correct number of means of egress). 

In addition to what you are thinking about, you MIGHT  need egress windows (every basement bedroom will need one), you may have an issue with light and air (code requirements usually push you to larger windows), fire separations between units, rated unit doors, fire alarm system.

It's best to go discuss w/a plan reviewer at inspection services in PVD, but don't expect to get all the answers over the counter, often they can't/won't give a full response until they see the drawings. 

If you do need a variance and/or special permit, you'll need to provide a survey too. 

Thank you both @Anthony Thompson and @David Sisson   Great information and some actionable steps I can take.  I plan on attending the RIREIG this month. I'll come prepared with a few questions, and try to get in contact with people who have done a conversion like this. Unfortunately, the numbers are not great without the additional unit but I'm going to continue looking into this so I will have a better understanding of the process for future possibilities.  I'll make sure to update this discussion when I get more information.

I think needing the 3rd unit is common (to get the numbers to work) in Providence. 

We have done a couple of conversions from 2 to 3 in PVD, but all were easier cases than yours. Generally you want R-3 zone, enough lot area, enough parking. Most are converting a large unused attic-that probably was a unit at one time. 

Basement conversions are less common here. 

In Boston we are combining basements into the first floor for bigger 2 fams then condo them. It’s not a thing here yet. 

BTW-neighborhood is critical here. Much of the city is cheap $1200ish a month for a 2br, then some areas get up to $1600—$2500 for a nice 2br unit. $1200 doesn’t really fund any decent rehab or addition. 

A sprinkler system is not required for a 3 family.  Hard wired smokes and co's are required.  If you are zoned for R3, that is a great start.  Unfortunately, you will just have to go through the motions and jump through all of the hoops that zoning requires to complete the process.  You will most likely need to upgrade your electrical service and depending on your heating situation, you may need a different meter bar installed. 

@David Sisson Really great perspective, thanks for sharing. We have a few legal-2-family that are three floors, i.e. second unit is two-floors, which seems quite common in Providence. They are all on comparable lots to neighboring 3-family properties and I assume might have been a legal-3-family at some point in the last 100 years. Would you be able to share what the gross budget would be for such a conversion?

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