Baltimore: Converting from 2 units to 3 units

13 Replies

I am under contract on my 2nd property in Baltimore City. It is a 2 unit building. To be honest, I am not sure of its zoning, but I believe it was originally built as 2 units, and it has 2 gas and 2 electric meters. It has been vacant for almost a year and was reportedly operated as a 2 unit rental for at least the last 10 years. 

I am purchasing the property with a streamlined 203K loan. I will live in one unit and rent the other. I will also turn my current house into a rental. I think the 2 unit building would also function well as a 3 unit building. Each floor could serve as a 1 bedroom apartment. I do not plan to set it up that way immediately. I would like to get through the 203K process and live there for a bit while I save money, but when I am ready to move on in a couple of years I think it would be great to make it a 3 unit. 

My question now is what are the requirements for a 3 unit vs a 2 unit. I assume I will have to have the property re-zoned in order to get a 3rd electric and 3rd gas meter. I know I can plan ahead by putting an hvac system for each unit, a water heater for each, separate electric, etc.. but are there other items to consider? For example - does a 3 unit building require an automatic sprinkler system? If so, I would really like to rough it in now while I'm doing work, rather than have to retrofit it.

Any other items to consider? Anyone have experience with zoning in Baltimore City?

@Andrew M. Make sure you can qualify for a legal bedroom. It needs to have a window and you want an electrical outlet on every wall, plus a closet.

Also, think about marketing your unit as a 1 bedroom with office (if that's popular).

I like to look at the net income of various options. It will be expensive to get your property rezoned. Will the NET income justify that decision?

If you were going from a four unit to a five-unit (commercial building) that could benefit from forced appreciation - THEN adding an additional unit could be justified from an equity creation standpoint BUT if you're under five units, then the decision is more subtle.

Originally posted by @Al Williamson :

@Andrew M. Make sure you can qualify for a legal bedroom. It needs to have a window and you want an electrical outlet on every wall, plus a closet.

 Andrew ... Al is just being funny there ... you really do not need a closet on every wall, one is sufficient. ;-)  However, any walls, or floors/ceilings, in common with another unit will need to be fire rated.

The first thing is to check your zoning to see if a three-unit property is permitted under current zoning and whether the property (building and lot) satisfy the sizing and coverage requirements for a three unit property.

If zoning allows for three units and the property satisfies all requirements, then you can turn your attention to resilient channel, fire-X sheet rock and closets on every wall .... 

Originally posted by @Al Williamson :

@Andrew M. Make sure you can qualify for a legal bedroom. It needs to have a window and you want an electrical outlet on every wall, plus a closet.

Also, think about marketing your unit as a 1 bedroom with office (if that's popular).

Well I think I could get $1k/month per 1 bedroom apt ($2k total) vs $1500/month for a 2 br (or 1br with office). I think the extra cash flow would be worth it over time. 

Originally posted by @Roy N. :
Originally posted by @Al Williamson:

@Andrew M. Make sure you can qualify for a legal bedroom. It needs to have a window and you want an electrical outlet on every wall, plus a closet.

 Andrew ... Al is just being funny there ... you really do not need a closet on every wall, one is sufficient. ;-)  However, any walls, or floors/ceilings, in common with another unit will need to be fire rated.

The first thing is to check your zoning to see if a three-unit property is permitted under current zoning and whether the property (building and lot) satisfy the sizing and coverage requirements for a three unit property.

If zoning allows for three units and the property satisfies all requirements, then you can turn your attention to resilient channel, fire-X sheet rock and closets on every wall .... 

 Thanks, Roy. I do need to find out the current zoning. I think it would be worth it to make it a 3 unit in terms of rent (see my reply to Al).  I understand I would be taking a gamble by spending the extra money for some items now with the risk being I may not be successful at re-zoning. I need to quantify what those items are and how much of a risk it is... Each floor would be a unit - basement, first floor, second floor - so it would be easy and not very expensive to slap up some 5/8 drywall. Where do I find out what all the requirements are for a 3 unit? the International Fire Code? 

Originally posted by @Andrew M. :

 Thanks, Roy. I do need to find out the current zoning. I think it would be worth it to make it a 3 unit in terms of rent (see my reply to Al).  I understand I would be taking a gamble by spending the extra money for some items now with the risk being I may not be successful at re-zoning. I need to quantify what those items are and how much of a risk it is... Each floor would be a unit - basement, first floor, second floor - so it would be easy and not very expensive to slap up some 5/8 drywall. Where do I find out what all the requirements are for a 3 unit? the International Fire Code? 

It's more than a gamble.  If the property is not zoned for three units, you won't be able to pull permits to convert it into three units.   If you go ahead and convert it anyway, you then have an illegal 3-unit with a bunch of non-permitted work.   The city/municipality could force you to undo the conversion.   In some jurisdictions, work without a permit will earn you a notation on title and you will be unable to sell the property until it is cleared.

If the property is not zoned for three units you would be looking at the costs and delay of a request for a zoning change.   If the current zoning allows for a triplex, but the property itself does not meet the zoning criteria (size, frontage, lot coverage, etc) you would have to apply for a zoning variance.   

To find out the requirements are for adding a {basement} apartment - things such as egress windows, fire separation, ventilation, etc - can be learned with a trip to the municipal building and permitting department.  You could also engage a reputable contractor who would be knowledgable of IRC, national, state, and local requirements.

A lot depends on the jurisdiction and their enforcement.

I removed a closet in one of the bedrooms of a two bedroom house. Told this to the tax assessor (hoping to get a break) but still taxed as a 2 bedroom house. When getting the house appraised the appraiser remarked about a basement office that if there were a window there, he'd say we had a 3 bedroom... 3 bedroom 1 closet house.

@Andrew M.
Well, you will definitely have to have all the smoke detectors to be hard-wired (with battery-backup)...and they need to be wired so that if one goes off upstairs, then the others go off as well. 

Also, in what neighborhood is this rental property to get $1000/month for a 1 bedroom? And I assume not including utilities since it's metered separately?

Speaking of meters, most likely some of the lights and outlets in the basement are split (or all) connected to one of the existing meters. If you make it 3 units, you'll also want a 3rd meter so that the basement is solely on its own.

Make sure you get your property certified lead safe or lead free. It's required for rentals built before 1978. Go lead free if you can. That way you don't have to keep getting re-tested every year or after every tenant change. One time and you're done.

@Nicole W.
The property is in Hampden. $1000/month not including utilities should be pretty easy to get. It will be a nice renovation. Low end 1br's get $800/month. High end 1br's in the renovated mill buildings get over $1500/month. 
I would like to get a 3rd meter, which is will I will likely need to get re-zoned - I will need the correct zoning for permits to have the 3rd meter set up. 

I am aware of the lead stuff, but good to know about the smoke detectors. Thank you.

I think you are underestimating the costs to get : 1) zoning change, 2) separately metered (both BGE and paying for electrical work, 3) It will open up your (possibly not 2 unit property) to be shut down by an inspector, you live in the city (canton or fells) good luck mate. You're better off renting it the way it is

Originally posted by @Ned Carey :

They may require parking for all three units. Hampden is already crowded. The city probably doesn't want more density there. 

 I thought about that actually. I could provide 1 parking space (possibly 2), but certainly not enough for all three. In my opinion, whether the building is 2 or 3 units, the number of tenants with cars could likely be the same. I've lived in the neighborhood for the last 10 years, and it is getting crowded. I think it will get a lot more so over the next few years.