Rehab a triplex or restore to SFR?

Question

Hi  everyone.  I wanted to know if anyone has encountered an older home that was cut up into rental units.  Here's what I'm looking at.

There is an older home built in 1901 with 2728 sq.ft.,  5/3, 2 blocks from the community college.  It has been turned into a triplex. I have been inside yet, but I think it is 2 - 2/1 units and 1 - 1/1 unit.  It needs ALOT of work, new roof, new flooring (one floor is appox. 8 inches off level).  Basically a total rehab. I have not taken a contractor through it. I was hoping maybe someone knew a way to roughly estimate based on square footage and that it is a TOTAL rehab. The current list price is $27k.

Has anyone ever taken a house like and restored it back to a SFR?  The nearest comp I can find is one that sold for $129K.  As a triplex, there is another older home that was split in similar fashion that is currently listed for $105k and is already rehabbed.

My husband hopes someone fixes it up, but he doesn't want to tackle it.  Would any of you approach this a SFR flip or fix and hold for rentals? Or is he right and you wouldn't touch it with a 10 foot pole?  Any opinions are appreciated.  Thanks!

Michael Seeker · Answer

If they say "no", resubmit the same offer in 30 days...that's how I ended up with my triplex project :)

I also had a joist issue, floors were about 3-4" off.  Ripped out old floors and joists and replaced for about $5K.  Certainly not a deal breaker!  It sounds like it would be worth your while to set up a showing and walk through with a contractor so you have a better idea of what you're looking at as opposed to "I think" this and "I think" that.

Dev Horn · Answer

Your husband does not want to tackle the rehab, so what is your exit strategy - to wholesale it?  If so, who cares about the configuration - the cash buyer can worry about that.

Make an offer, get it SUPER CHEAP (land value only), and wholesale that thing.  Let the buyer decide if they want to fix, reconfigure or bulldoze the thing.

Leave yourself an out - pending satisfactory report from your inspection.  If you can't find a buyer, bail out on that 8" off level issue.  That is a HUGE red flag, BTW.

Michael Seeker · Answer

@Christine Glasner - I'm actually in the middle of a very similar project.  I bought an old victorian home that had been converted to a triplex probably around the 50's or 60's.  It was in terrible shape and a huge eyesore.  Also located within 100 yards of 2 of my multifamily buildings, so I had added incentive to tackle the project.  My initial rehab budget was about $50K which was more or less lipstick on a pig, get it looking nice and rentable.

We're about halfway through the project and my current spend is over $50K.  I've since revised my budget to around $100-110K due to many unforeseen costs and design changes.  I'll still make out pretty well on the back end, but obviously spending a lot more than what I went into the project thinking.  If you're considering the property, I would double whatever budget and timeframe you start out with.

As far as leaving triplex vs rehabbing to single family, I would say it depends on your exit strategy.  For me, I am looking to buy-and-hold, so leaving as a triplex is a no brainer.  If you live next to the property and plan to sell upon completion I would definitely convert to SFR.  There are many other factors that come into play that I can't even begin to speculate on without more information.

Christine Glasner · Answer

@David DuCille great question about the permitted split.  I don't know the answer. The college is mainly commuter, but there are plenty of of apartments and townhouses close by the students rent to be closer to the school.

Michael Seeker there isn't that much room in the comps to double expected expenses. I figured a flip would be too tight.

@Dev Horn the county has the land value at $8k and total value $43k as of 2011 (last county appraisal).  According to county records it was last sold in 2005 for $213K. Have you ever offered land value only on a property before? I hadn't really considered wholesaling. Do you think it's worth my time to actually take an inside look with a contractor to get a better idea of costs, especially that floor issue?

Thank you all for the input and insights.  I really appreciate hearing you thoughts on the issue.  It seems most people agree with my husband. Shhhh, don't him. lol

Would a better idea of scope of work and knowing whether it is a foundation issue or just some floor joists change anyone's mind?

Christine Glasner · Answer

The house went for auction, so I waited to see what happened.  Opening bid was $19k.  It did not sell.  We went to see it with an agent.  It was worse than I hoped and misrepresented.  It turned out to be 3-1/1 units.  We are not going to offer anything for it.  Thanks for all the great advice.

Christine Glasner · Answer

The floor issue is on the first floor.  So far we've only peeked in windows.

Thanks.  I will set that up and then post an update.

David DuCille · Answer

certainly no reason to not try and go through there with a contractor.  as for the unlevel floors, you said "one level is approximately 8 inches off level" sounds like it's not the first floor.  could be that when they chopped it up to 3 units they took out load bearing walls and didn't support properly.  may not be a foundation issue at all.  I was also thinking of the idea of doing a total teardown and rebuild.  As for offering land value only a wise man once said "the answer is always no when you don't ask"  Go through it with a contractor, try to get a real good idea of what it's going to entail to renovate, add 20-25% on top of that as a contingency and then make your offer accordingly based on what you think you can get in rents post rehab.  If they say yes, great! if they say no, move it along.

David DuCille · Answer

I agree with others but at the same time, the list price is very low as well.  It doesn't sound like it would make much sense to restore to a single family if you say the comps put the price around $129k.    2700 sqft is a lot of house and with the age of it and the issues you describe it sounds like rehabbing it could run into 6 figure range.

As for estimating costs, it's going to vary depending on where you are.  in New York City where I lived for the last 12 years, new construction can run around $300 sq ft.  Here in Tampa where I now reside, new construction can be done for $80-$100 sq ft.

is the community college solely a commuter school or do kids live there and need housing?  keeping it a triple and marketing it as a student rental means you don't have to be as extravagant with your renovation.  keep everything pretty barebones and that can keep renovation costs down.  Sounds like buy, renovate, and hold would be best option.

One last thing, do you know if it was LEGALLY split into 3 units and when?  last thing you want to do is buy it planning to keep it 3 units and then go to city hall and find out it's not permitted as a triplex and you have to shell out tons of cash just to get plans drawn up to do so.

Abel Vazquez · Answer

@Christine Glasner  I would say to not touch is with a ten foot pole unless your are going to low ball on the land and bulldose the house down from what you are saying.

Andrew Syrios · Answer

massive rehabs of older houses can become money pits real fast especially with a foundation issue. Generally the best way to estimate the rehab is to addup every major item, add a few thousand for knick knack, a few thousand more for holding and then maybe a20% unforeseen allowance.

Rehab a triplex or restore to SFR?

Most Popular Reply