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Aung Soe
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West Hartford 2 Units or 3 Units

Posted Sep 14 2021, 09:08

Hello all. I'm new to real estate investment. My background is in engineering but I like doing investments. My wife and I are buying our first multifamily investment property in West Hartford area. Been listening to a lot of real estate podcasts and Youtube channels. Majority of the pros are bullish in rental property investment. Any thoughts here?

The property that I'm purchasing is currently 2-unit multifamily (2-bed, 1-bath on each unit). The layout is nice but it looks to be poorly managed with tenants paying under market by about $300 for each unit. The lease will be up soon and its agreed with the sellers that they will not extend so we should be able to raise rents and vet tenants ourselves. Here's the dilemma. The attic has a partial finished bedroom and its currently connected to 2nd floor so that makes 2nd floor a 3bd/1bath unit. The whole attic can be converted into a separate unit.

Option-1: repair minimum (still going to cost me like $10k) and rent 2nd floor as 3 beds, 1 bath

Option-2: in-addition to min repairs, add a full bathroom in the attic and make 2nd floor a 3 beds, 2 baths - so higher rent

Option-3: in-addition to min repairs, convert attic into 3rd unit as another 2 beds, 1 bath

I'm putting down 25% for the rental investment so we are limited in cash for renovations. Option-2 is probably the most practical thing to do but the cash-on-cash for option-3 is very tempting (15%-20%). I'm estimating $25k to convert into separate unit (~1000sqft) and it will have paid off by a little more than a year. The down side for option-3 is we won't have 6months reserve.

Reasons we are buying this house is because we can increase the rent substantially and the potential to add a 3rd unit. We will add the unit in the future, if not now, so may be more efficient to do it while no tenants are occupying the building. Really appreciate opinions on this.

Hartford, Connecticut

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