Greenwich - Returns for building an additional home on my lot?

Question

I'm located walking distance to the Greenwich train station, right around the corner from Equinox.

I have an 880-sf free-standing garage that I can legally convert to a separate unit. Lot is about 0.25-acres with plenty of FAR. Conversion of the structure to this new use is permitted as the structure is grandfathered under the code. I'm guessing when all is said and done it will cost around $100k for the conversion, perhaps a bit more should I run into issues with rock in the ground when running utilities. I could turn it into say a nice 1-BR with garage or smaller 2-BR apt. I'm still conceptualizing all of this.

I'm thinking about a few options: 1) Airbnb it, 2) rent it out, 3) sell my house (with this new unit) or 4) convert both structures to condominiums (if even possible).

I'm also considering renting out my own house too (single-fam), ~1,500-sf, 3BR, 3BA.

For those familiar with this enclave, what do you think these could rent for, and what premium do you think that it would add to the value of the property? I closed 6-months back at about $750k.

Thanks in advance!

Scott Hollister · Answer

@Paul Bergagna I love the value add mindset. And with proximity to NY and the train station, very good long term play. Like Minna said, hard to comp out but not impossible. Your goal should never be to sell it, as long as it cash flows.

And if the rent is around that 4400 mark, and you're putting 100k into... I would sign up for that return all day long.
The issue is refinancing if you don't have the capital to sit on, and like Minna said, that could hurt you on the back end.

What type of financing did you use on the purchase? Rate and term? % down?

Scott Hollister · Answer

@Paul Bergagna I agree with @Minna Reid, the buying pool will shrink. I bought two homes on one lot and had no competition, but it has been an amazing rental property ever since. Typically the value is cheaper, which is a benefit to you as the long term buy and hold investor.

What is your goal with the property? And do you need the capital back out or can you let it ride?

Michael Gansberg · Answer

@Paul Bergagna - sounds like you have some great options available. I don't know how it will affect resale value, but since you would still have garage space in the primary home, the functionality of the home will only be improved. You could airBnB it and use it as personal office space when it's not rented out(assuming the town allows airBnB.) I'd configure it as a 1 bedroom with an open floor plan to allow for a spacious-feeling office area.

My wife and I are considering buying into a situation like that in upstate New York or Connecticut- we like the idea of an accessory dwelling unit where we could go to conduct business(she's in interior design, I'm in real estate primarily.) We're both loud on the phone, and it's a luxury to have a completely separate space.

Why not estimate that you'll receive 50% to 100% of the cash invested on the back end when you sell? And if the rental income is still compelling, considering the worst case scenario of 50% back, then move ahead with it.

Paul Bergagna · Answer

Yes, per my numerous conversations with Zoning and Planning officials, it is permitted. Granted it's not formally approved yet, but the code has provisions for the change of use given the age of the structure (over 50-years old) - it's grandfathered in.

Jaysen Medhurst · Answer

@Paul Bergagna, are you sure that you can legally convert the structure to another unit? Greenwich changed the rules for R-6 back in June of 2017.

Paul Bergagna · Answer

Hmmmm, I haven't looked at it as you are.

The primary home also has a garage. The free-standing building is can currently be used as a garage or storage shed. Regardless, it's in rough shape and requires some structural upgrades, and a new roof in the near term. Figure $30,000 renovate/upgrade it as a garage/storage unit.

So what you're saying is that the house would be more valuable/marketable if the ADU was a useable garage (figure all in basis of $780k) rather than if it was a livable space/rental or studio (all in basis of $850k)?

Just trying to see this from all angles.

Minna Reid · Answer

Sounds like a nightmare to comp and sell. Your buyer pool would be tiny and lending would be challenging. If you’re going to do this at all approach it from a rental point of view, and frankly for an 850 K price tag altogether this does not sound like a good rental investment property.

Ed Emmons · Answer

If you talking about Greenwich, CT, I’m familiar with the area. My wife’s uncle rents a 2 br over a garage and it includes 1 bay of the garage for $4400 per month. It is located near the yacht club. I would guess the apt is 650 sq. / ft. More or less.

Steve Cheslock · Answer

@Paul Bergagna

There are many options here and I am very familiar with Greenwich (grew up in Greenwich and currently living in backcountry next to Stanwich).

First off you have an empty lot .25 near the train station? There are .1-.12 acre lots in Byram (R-6 zone) asking $230K (granted thats asking), you thought about selling the land?

Not sure if you have worked with Greenwich P&Z before, but I have never heard of anyone having an easy time. My family is currently in the middle of trying to subdivide 20 acres and it's been a huge hassle. This is not the first time we've dealt with them and in the end there have always been costly "issues" after we were promised things.

As far as rental rates I'm currently looking at rental rates all throughout Greenwich because I am looking at a two family in Byram. Ed, if you have someone getting $4400 for a 2 bedroom over a garage tell them to do whatever they can to have them stay there. This is not market value and not even close. @Paul Bergagna I have access to the MLS. PM me and we can meet somewhere in Greenwich and I can show you what's on currently on the rental market (I was just looking at a 2 family on Bruce Ave) and the rates.

Minna Reid · Answer

@Paul Bergagna no I’m not saying that the conversion would decrease the value of the property as a whole. I have no idea what it would be worth after – I have not run comps on it. However I can assure you that having two single family homes on one lot will be much harder to sell than a single-family home with a detached garage. It doesn’t make sense for the average family and it doesn’t sound like a cash flowing situation for an investor. The only way it makes sense is if you intend to occupy the one home and rent out the other and collect the rent yourself. Just know that your exit will be difficult.

Greenwich - Returns for building an additional home on my lot?

Greenwich - Returns for building an additional home on my lot?

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