Is a 4 br 2.5 BA tough to find a target audience?

Question

Greetings all - Currently renovating a formerly 2 BR 1.5 BA property in West End Alameda, CA with an open downstairs area. I am thinking of making the large open space downstairs into an extra 2 BR 1 BA to utilize the space. However being a rental property I am also thinking of the target audience, who I assume would be a large family who is transitioning into the area. My question is would making the property such a large potential occupancy, ruling out couples without children, and even couples with 1 child - Am I putting myself in a tough position for finding tenants? I would save time and money by doing little renditions to the downstairs area, leaving it for storage and perhaps an entertainment room/office. Most families I know of 4+ that have young children are not exactly looking to rent a big space and pay a substantial amount of rent. There are other audiences that would love the property as well, but my best guess is a larger family. Any insight is much appreciated, God bless.

Hans Christopher Struzyna · Answer

Hey, @Amit M. thanks for your question. In Alameda specifically, the ADU or extra units are very normal and in many cases ideal. There are many young buyers who want to have their parents stay with them long term and are open to house hacking to offset the PITI. There is another fairly large segment of young parents with busy schedules who want an au pair suite (likely not renters though). So for that buyer segment, an official ADU isn't necessarily required but a suite with a separate entrance on a different level is ideal.

Generally, you will also find that having three bedrooms on a single level is an ideal floorplan, particularly for families with multiple children who want to live in it as a single family home.

I have found that even many high-end homes have ADUs or au pair suites that people like to rent to traveling nurses, professors on sabbatical, grad students, their kids who come back from college or aging parents (likely no rent in that scenario). That said, true multi-family units or homes with ADUs don't sell for as high of $/sqft compared to true single family homes for a variety of reasons. Rent control and privacy being two. If your goal is to rent and be flexible, I'd go with an ADU that has an internal staircase that can be closed off. If you want to get top dollar per sqft, maybe a 4/2 is better, but that is really neighborhood dependent.

I hope this answers your question.

Amit M. · Answer

@Hans Christopher Struzyna yes I think that's pretty spot on. Now that adding ADU's is legally possible, It'll be interesting to see how specific neighborhoods fare in this question. The good news is that you're adding legal sq ft in either option. But I agree that it will probably be very neighborhood specific.

FYI in my case the decision was easy, as I own a few duplexes where I have legalized the inlaw behind the garage. Going for 2 to 3 legal units is sort of a no brainer :)

Amit M. · Answer

@Hans Christopher Struzyna I’m curious, have you been able to get a sense of how well an SFH with a legal ADU sells for compared to a same sized SFH. Like the above described property, assume you can either make it a large 4/2 with a large master downstairs, vs a smaller 3/2, and a 1/1 ADU downstairs. Same total sq ft for both homes.

I’m asking because it seems to me that higher end neighborhoods don’t necessarily want an ADU, but prefer a larger home with the large MBR. But maybe that’s not the case anymore? I agree that having it as you suggest, where you can open/close the connecting staircase is ideal for flexibility. But I’m wondering on the end value. The SFH + ADU is technically a 2 unit property. And if there aren’t many of those in the hood, or they appear to be odd, then maybe it doesn’t add as much value as the traditional 4/2 expansion?

Hans Christopher Struzyna · Answer

Hi @Bang O. sounds like a cool project. Alameda is really diverse in its renter population as there are so many large homes and Victorians that have been converted into multi-family units on the island (due to Measure A that restricts density per parcel - http://www.saveourcityalameda.org/alameda-measure-... ). That said, due to the housing shortage in the Bay Area (particularly affordable housing), there has been a big movement to allow for ADU additions and conversions of spaces like what you are talking about.

Having seen hundreds of homes in Alameda and Oakland alike, so many are converted poorly and renters know that. If you are able to add two bedrooms and a bathroom downstairs with some kind of internal staircase that can also be closed off to allow you to rent each floor separately, that will maximize your rental pool and your value. The big thing you will be contending with on the West End is the base redevelopment project that will bring hundreds of units to the island. Though you will benefit from the ferry proximity and the 2nd ferry terminal (once its opened).

I will also say there is a big trend for folks looking to buy (and rent) a space that allows for multi-generational living. Depending on what your cost to develop the downstairs area is, it may or may not pencil though. Plus you need to consider the impact that Alameda's Rent Control plays on your long term cash flow. Id say the biggest bang for your buck right now creating a space where multi-generational families can live but can be rented out two independent spaces if need be. Perhaps you could do a small kitchenette downstairs and look into short term rentals there. Flexibility in this market is key because we are so transient with all the tech companies coming and going as well as many of the baby boomers downsizing.

I hope this helps. DM me if you have other questions.

Scott Passman · Answer

@Bang O. Why do you feel you would rule out couples without children/only 1 child? So many people work from home now that home offices are commonplace. 3 and 4 bedroom homes have a lot of potential and I don't think you would alienate many people, depending on your market demand/neighborhood. If the numbers make sense to turn it into a 4 bedroom then I don't think you should refrain based on this concern alone.

Is a 4 br 2.5 BA tough to find a target audience?

Is a 4 br 2.5 BA tough to find a target audience?

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