Do I need permits to convert a single unit to duplex?

Question

I have a 4 unit property that is separated into three buildings. One of the buildings is a three bed two bath that was converted from two 1 bed/1 bath units. I was considering turning it back into two units as that would generate more income than I would be able to get from the one unit.

I was curious if I need any kind of permits to change the construction of my property?

Also, I know it may depends on what my plan is (hold vs sell) but also possible advantages and disadvantages of converting it from a 4 to 5 unit. Obviously, I would be able to generate more income but it may also be more challenging to sell a 5 units as I'm reducing my potential buyers.

Thanks!

Jake Miller · Answer

Thank you all for the feedback! I'll definitely have to look into the numbers more about the cost and think what my long term plan is with the property. If holding it long term is my plan it may be best to covert and gain the extra income. While selling may be better to keep as is. There is a property 6 streets away that is a 5 unit that has been on the market for two weeks and recently reduced price by 20K while all the four units in Phoenix, if priced right, are under contract in days.

Frederick Kirk Wendel · Answer

Always following the rules assumed.

Its all in the numbers. Permits, labour and materials, insurance...

VS

Final sale price, and Cashflow in the meantime.

Here is a thought. What type of tenant are you looking to attract? (Transient workers, these folks work alot and just need a bed. Or maybe a young family, where the privacy of a room at times is needed)

Sometimes missed is your/our chance to help someone else learn about creative finance. Hard time selling? your in on that deal too.

Last thought on tenant targeting. I read about a hospital renting 3   units close to the campus so the travelling nurses could always get a room for there 3 to 6 month rotation. even if the nurses found other residences, the Hospital still paid.

Any Hospitals near the prop?

just some thoughts.

Kirk

Todd Dexheimer · Answer

Permits and zoning for conversion.

For changing from a 4 to a 5 unit, that will depend on your market, but generally it's a little easier to sell a 4 unit, but the price should still be higher based on performance with the 5 unit. I would go 5 unit if it makes sense and raises the NOI enough to justify.

Jon Holdman · Answer

Not only building permits but zoning approval.

1-4 unit properties are elgible for "conventional" financing.  5+ units requires commercial financing.