What to do with partially finished, walk up attic?

12 Replies

Yesterday one of our tenants notified us she'd be moving mid-July. The unit is a large second floor 1 bedroom and is the only unit that has access to the attic. The attic has stairs going up and is approximately 500 sq ft, partially finished, high ceilings (not those sloped ones you hit your head on when you get too close to the wall!). Currently, its empty and stays closed off. We've tossed around the idea of turning it into a studio unit or adding living space for the unit below by creating a master suite - budget option would be to just do a bedroom with a large closet. To meet code I do believe we'd need to alter the stairs because the grade is too steep and our county requires a rental certificate that is reinspected every 2 years. 

I'd guess, with the stair reconstruction, finishing it off, adding a bathroom, we could easily spend $20k. With no bath, maybe $10-12k? Unit was previously rented for $475 but its under market and we're also going to update the kitchen and bath. New rent should be $650 without the attic... if I could make it a 2 br, it could go for $900 even without the second bath. 

What considerations would you have before taking on a project like this? Worth it or leave it as is?

An extra $250 a month or potentially $3,000 a year could be worth it. I would first ask, how long do you plan to keep the property for? If it is only for a yea then probably not worth it. If more than 3 years then your looking at additional $9,000 in rent. The other aspect I would look at is how much value add is there in the property. Would the addition at $5,000-$15,000 to the value of the property? Combine that with the additional rent and it could be worth it. If there is little to no value add and you don't intend on holding the property for long then it may not be worth it.

Colin Smith, Real Estate Agent in CO (#ER.100052152)
719-232-6709
Originally posted by @Colin Smith :

An extra $250 a month or potentially $3,000 a year could be worth it. I would first ask, how long do you plan to keep the property for? If it is only for a yea then probably not worth it. If more than 3 years then your looking at additional $9,000 in rent. The other aspect I would look at is how much value add is there in the property. Would the addition at $5,000-$15,000 to the value of the property? Combine that with the additional rent and it could be worth it. If there is little to no value add and you don't intend on holding the property for long then it may not be worth it.

 We plan to keep the property long term. Currently have 3 properties (6 units). Goal is to build up to 10 properties in the next 5-8 years. We just purchased this 4 plex last week and its currently lower income tenants with below market rents. Plan is to upgrade them as they turn over increasing gross rent from $2000 to $3000-3200. I definitely think bumping up to a 2 bedroom unit will increase value whether we sell in 3 years or 20, especially when combined with the other updates we're tackling. 

Does this attic area have a window meeting building code requirements for egress?

Originally posted by @Steve Babiak :

Does this attic area have a window meeting building code requirements for egress?

 It has 2 windows although they might be a bit small to meet code. Given that the walls near the windows aren't finished yet, I'd think it would be an easy swap?

You might check code to see if the stairs really need to be done since they are existing. I'd say go for it since you're holding long term. I like to keep a variety of sizes of rentals so I have something to offer all tenants at various price points. For example, currently we have a 1 bed, a 2 bed, a 3 bed and two 4 beds.
Originally posted by @Ashly B. :
Originally posted by @Steve Babiak:

Does this attic area have a window meeting building code requirements for egress?

 It has 2 windows although they might be a bit small to meet code. Given that the walls near the windows aren't finished yet, I'd think it would be an easy swap?

You would have to do some re-framing to enlarge the window opening. Casement windows might be a good option to consider since they give maximum egress in the smaller openings. 

We did this when we needed a new roof. We added two dormers, one for a bathroom and one for a second stairway (which is actually now the main stairway to get up there).  Check with zoning in your city. If you're adding an extra unit, sometimes there are extra rules that come into play.  I'm not sure how much we spent for our project, maybe it was in the 50K-ish range, maybe more (that doesn't count the new roof). We did a lot of insulation and plumbing and HVAC, all expensive. The attic also wasn't finished at all before we started. Let me know if you have questions.

@Tanya F. Did you find it to be worth it? It's crazy that you could spend as much finishing an attic as you could on a sfh!

There's no SFH available around here for that little! More like $200K for a nice SFH - we only invest locally here in Madison,WI.

This house is in a super trendy neighborhood that commands quite high rents. So yeah, depending on your neighborhood it might be really worth it.

In the long term, our project should be worth it. We're getting $700 per month extra for our ~600 sq ft addition, and we could charge more, probably $800. We're giving our first tenants a good deal because they were patient during the construction (they're renting downstairs, too).  

One way to look at it is by the 1% rule.   We're definitely meeting that (we certainly put less than $70K into the remodel considering our $700 in rent). If you think of the added space like buying another property, you can judge how much to invest using similar logic to evaluating a new purchase. But since ours is brand new construction up there, it's not going to need the repairs that the rest of the old house is going to need. And we just replaced the roof.

@Ashly B.

How much rent could you get for a separate attic apartment?  And how much would that project  cost you?  (Also, would you need an exterior stair built as well -- for a private entry to the separate attic apartment?)

Stairs, a second bedroom, heating vents, windows, insulation,  that sounds about what you can do easily enough. Plumbing can mean tearing out walls to get the plumbing in, drains, vents, and water plus you would be adding places that could leak and cause a big inconvenience should the new plumbing fail anywhere affecting all units and tenants. Keep it simple. 

Also best to stay within your zoning. Adding one more unit may put you outside of the allowable plus as mentioned you would probably have to add an access stairway, an additional risk of people potentially falling down those stairs. Then you might have to meet some kind of parking requirement. I would leave well enough alone.

Originally posted by @Kurt F. :

@Ashly Baugh

How much rent could you get for a separate attic apartment?  And how much would that project  cost you?  (Also, would you need an exterior stair built as well -- for a private entry to the separate attic apartment?)

 I think we could rent it for $600/mo. I'm not experienced enough to be able to give a good estimate on the project cost. Need to look more into it. 

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