How to transform an SFR into a multi-family?

Question

Hello,

I would love to hear from those that bought an SFR and transformed it into a multi-family rental property, i.e. a duplex.

Can you share your story on that transformation?

What made you want to transform it? Is it because you wanted to house-hack, force appreciation, or a different reason?

How did you transform it? Did you do it yourself or hire contractors?

Aaron F. · Answer

The current setup will be one electric, one water, single network of ductwork/HVAC, etc. Making sure all utilities can split is a high priority when I look at duplexes. Splitting all of that is not easy or cheap.

Andrew Maxion · Answer

Hi @Jonathan Feliciano,

Love the idea of investors maximizing the most out of their SFH!

I work with many investors around the Bay Area, and many are looking to add ADUs onto their properties. The reason being is that building ADUs can effectively turn your unit into a duplex and add more streams of income.

Most investors either Buy n Hold or House hack for their strategy, and these secondary units can have high cap rates and easily 15% CoC return!

As goes for doing it yourself, this can potentially save you money but can take a year or two out of your time invested in this. Most investors don’t want that headache, so they hire a service that would take care of everything A-Z.

Hope this helps Jonathon, and glad to discuss more!

Jonathan Feliciano · Answer

Thank you for your feedback everyone!

David Edwards · Answer

@Jonathan Feliciano Something to look into as an option is if your jurisdiction allows accessory dwelling units or ADU's in your zone. If so, this is a popular way to add a unit without having to convert a SFR to a duplex.

Patrick Orefice · Answer

@Jonathan Feliciano

As Allan said, the first thing to do is check with the zoning department. Many single family homes will likely not be zoned to become multi.

If zoning is good, speak with an architect. Each house is different and may require a different approach to add units (split the existing house, add on to back or side, add a story, etc). Other zoning laws, i.e. setbacks and parking requirements may come in to play as well. Also you will have to decide whether to add water and electric meters for each unit or keep the single.

As always just make sure all the numbers work.

Allan Smith · Answer

First make sure the zoning allows it. It will cash flow better but the value may not go up as much as the renovation will cost. Then just make a plan for how the place will be split into two. Meet with contractor or architect to discuss floor plan, where plumbing will go etc.