Salem, OR · Member since 2014 · 56 posts · 5 votes
Hi all, I've had a few investment properties that were already set up for dual living pop up but have passed on them until I learn more. The one I liked the best was a 4/3 having a 3/2 upstairs and a 1/1 down in seperat finished basement. I like the idea of one mortage two rents.
So here are a few questions
1. How do you do utilities?
2. More less chance of tenants driving each other crazy than in a duplex?
3. Any tax benifits?
4. Any advice or words of caution would be greatly appreciated.
5. I'm calling this dual living is there another name for this kind of prop
In a semi-previous-life (different position at the same company) I used to conduct energy audits on large MF properties. 100% of the time, we found that if Management was paying for heating/cooling, the tenants kept their units at 75+degF in the WINTER and 64degF in the SUMMER. (One unit we surveyed had their t-stat set at 84degF and complained it was too cold).
I do not purchase small MFs that don't have separate utilities for each unit (heating, and electric). I try to find units that also have separate water bills, but that doesn't always happen.
If I am faced with a good deal on a property that has one central system, I subtract the cost to install separate systems into my offer (usually discounted slightly, ie: if cost were to be $12,000, I would subtract $10,000, assuming my savings would be $2,000 for the year).
Most used to be single family home with basement. However they put 2nd full kitchen and bath in basement turning it into a small apartment. So two rents one roof. But not a duplex. Thanks
I know what you mean. Lots of those in certain areas around here. I'd call them illegal duplexes. If its not zoned and permitted as a duplex I would only rent it as a single unit.
So a duplex has seperate water/elect/utilities for each unit right? Not sure how I would structure who pays what if only one meter for each utility to house.
I have one of these myself where the garage was converted with permits and has a full bath but no kitchen. I would be interested to hear more on this subject because I have let it sit unused since vandals got in sometime before I purchased the place and trashed the walls inside.
I did recently put a new foundation and slab in the main area and have new windows and doors for it but that is as far as I have gotten. It's on the same utilities as the main house but has its own breaker box etc.
I'd be scared they would have the heat at 80 all winter and using the front water faucet to run a car wash in the summer if they didn't get bill. Or is that a law.
In a semi-previous-life (different position at the same company) I used to conduct energy audits on large MF properties. 100% of the time, we found that if Management was paying for heating/cooling, the tenants kept their units at 75+degF in the WINTER and 64degF in the SUMMER. (One unit we surveyed had their t-stat set at 84degF and complained it was too cold).
I do not purchase small MFs that don't have separate utilities for each unit (heating, and electric). I try to find units that also have separate water bills, but that doesn't always happen.
If I am faced with a good deal on a property that has one central system, I subtract the cost to install separate systems into my offer (usually discounted slightly, ie: if cost were to be $12,000, I would subtract $10,000, assuming my savings would be $2,000 for the year).
We refer to these type of units as mother in law suites. They were often constructed for a family member to have some semi-autonomy but to also be close to the rest of the family.
Depending on zoning they could be illegal and this could cause problems with the town as well as with financing. most banks won't finance an illegal zoned property. And if illegal the town could prevent you from use the unit as a separate unit.
In some areas they also have granny pods which are a separate structure used to house a relative. In some single family zoning they permit these as sort of a temporary structure and when that family member no longer lives there the granny pod must be removed.
Basement units will in my area always rent for less. In another thread on BP we recently discusses egress windows for basement units.
Another issue is dampness of basements and the difference in temperatures. There can be 20 degree difference between the basement and the upper floors and if serviced by a single furnace, one unit could be too hot when at the same time the other is too cold. Separate heat sources and a dehumidifier would help these problems.
Here the City zoning and ordinances refer to these as "accessory apartments", but colloquially they are called Mother-in-law Suites as @David Krulac pointed out. Here, they would not be classified as an over/under duplex unless the lower unit included the above grade main floor.
David is also correct that they rent for less, even if they have a frost wall and are 50%-60% above grade, as folks do not like living in holes. The one caveat to the rent for less in this area is a basement apartment in close proximity to the university campuses ... in that scenario you could likely rent it for the same as an above grade unit.
I will check forums on accessory / mother in law to see if I can find even more great info. Here is an address of a house on zillow that fits what I'm looking at. 1435 marshall 97302
Awesome tip about dual funaces. You guys are awesome. I assumed that the basement would rent for less.
Been looking at homes where the upper half would make property a little cash positive and the basement half would be just gravy.
I'm conserned that it would be hard to keep long term tenants. Any one had experiance with this?
Scott:
I missed the above when crafting my earlier reply. In the case of single-family homes (SFH), you might well find that you will command less rent for the house proper if there is a rented accessory apartment in the basement. It has been our experience that many/most tenants for SFHs are looking for the privacy of not having a common wall.
Again, our observed exception to this is the "universityville" student house, where there is no rent loss in the main house if the basement is rented separately.
The ones I've seen have almost always been converted without permits. Sometimes the units are isolated, sometimes not. One area has many copies of the same floor plan and if public records show it as a 2/1 with basement your are almost guaranteed its actually a 4/2 with two non-conforming (no egress) bedrooms and a bathroom in the basement. Sometimes with a separate kitchen sometimes not. Never with separate utilities or heating. The floor plan has stairs into the basement that run down into the basement that have originally have three doors at the top. One to the garage, one going outside and one to the kitchen. Often the kitchen door has been blocked off making the upstairs a 2/1/0 and the downstairs is an illegal 2/1/1. I've tried to buy a few of these, without success. I would only rent it as a single unit. I did check with the city on a few of them about permits. Didn't exist, so I stopped bothering. If public records says its a 2/1 and you see a 4/2 its an unpermitted conversion.
@Scott McGill here zoning allows for these types of units and most were done years ago so are grandfathered in as well. Grandfathered is legal but non conforming. You can continue to use it but could build it today. Local laws vary on all these issues as well.
Here we would call it an up/down duplex. The worst type of multiple occupancy units IMO. Shared utilities are a huge headache. Best case you prorate and bill back (not legal everywhere). Shared heat and cooling sources also a huge headache as mentioned above with regards to keeping both comfortable. Noise is the other issue. The basement hears all the footfalls above. Another issue with shared heat and AC is sound traveling through the ducts. Both units can hear the conversations (and all other activities) in the other unit.
It takes big dollars to separate utilities and do sound proofing so there is a measure of privacy between the units. Only buy if you get a great deal but know it will be hard to sell in the end.
In my areas, it's the zoning that makes all the difference for income on those types of properties. You can legally convert (with permits) garage and basement space, no problem. You can even get an illegal conversion permitted after the fact as long as you are up to code. But if the property is zoned single family, you can't have a kitchen in the unit. Many owners will add or complete the kitchen after the inspections. Or they offer only a microwave and hot plate and advertise it as an efficiency kitchen.
I will check forums on accessory / mother in law to see if I can find even more great info. Here is an address of a house on zillow that fits what I'm looking at. 1435 marshall 97302
Sorry could get link to work with my phone.
Tread carefully and make sure that 2nd unit is allowed to have a kitchen. That property is zoned RS. You can read the RS zoning on the Salem website. RS is single family only with some exceptions. A corner lot can be a duplex. And separate guest quarters are allowed but must be in a separate building. There may be other exceptions. I'd be very careful and not assume anything until you have confirmed that the 2nd unit is compliant as it is.
Lots of landlords are ok with illegal units. It works out till it doesn't. A bad time to find out when it't not working is when a tenant reports a problem to the county or city, or when you can't refi.
Wow...I just found Bp a few weeks ago and after this small forum ? And fast wonderful responces I am completly AMAZED. As there has not been one post positive about the idea it seems clear to me that these units are DEATH TRAPS!!!
Wow...I just found Bp a few weeks ago and after this small forum ? And fast wonderful responces I am completly AMAZED. As there has not been one post positive about the idea it seems clear to me that these units are DEATH TRAPS!!!
You have all been really helpful thank you
Scott
I don't think anyone said anything about death traps, except for you. That property may well make a good rental investment. That second unit may be fully compliant. You have to take the time to talk to your city and county. It's called due diligence. Do the research, do the math. The RS zoning in your area also allows for something called two family sharing. I have no idea what that is. 2 units, one kitchen? Regardless, I'd get clear about it before I purchased it.
I lived in an illegal basement apartment before buying my first property last year. It had very nice finishes, granite counter tops, garden level windows let in lots of natural light, new paint and carpet, modern sliding doors, tasteful bathroom (granite, rock floor in shower, high quality tile in shower, fancy sink), and huge, 1400 sf 2-br 1-ba. Still, we (my GF, dog an I) lived in a basement and could hear everything upstairs (kids running around, adults doin' adult things...) and smell everything (what are they cooking?!? smoking weed again? hope the kid's not home! [it is CO]). It was a nice place but it was a huge relief to escape the subterranean homesick blues.
My first home purchase has a similar, but in my opinion, far superior set up. There is a 3-br 2.5-ba front house we rent out (creating an asset along with our liability), then above the garage is a 1-br 1-ba "carriage house." The apartment is small, 500-sf, but allows the front tenant to pay my mortgage. When we get married and need more bedrooms, we can move into front house and rent the apartment to offset ownership costs. It's an ideal setup and I'm glad to have found this opportunity. Hard to classify the carriage house as a mother-in-law unit though, unless your MIL enjoys a long staircase to the second floor!