Do converted 2unit houses have less market value then a comparable traditional house?

Question

I've noticed in my area that houses that have been converted into 2 units tend to sit on the market for much longer and sell for much less than traditional single family houses with similar sqft and finishes. Is this the norm in real estate?

Also, what about appraisals? Do appraisers see houses converted to 2 units as less valuable?

Ko Kashiwagi · Answer

This is market dependent and it can be influenced by the comparables in the neighborhood. It can also be influenced by the ratio of investors vs owners. For example, some neighborhoods have much larger percentage of owners than investors, in which case SFH may be more desirable. I've seen markets where 2 SFH are more expensive than a duplex for the same cash flow and otherwise in a different market.

Bryan Montross · Answer

I do think this is a little bit market specific. Appraisals are based on comparable sales in the area. If the area you're in has a lot of converted 2-unit houses and they are in demand, they may be more valuable than the traditional single-family houses. It comes down to the demographics of the people in the area. If your in an area with a lot of investors who want to maximize cash flow or where first-time home buyers need more income to get into a starter home, they might have a higher value. If you're in an area with mainly young families or maybe an older generation who just want to live by themselves and not be bothered with people living in the same structure as them, then the home is probably less valuable.

One thing I do with some of my investments is to convert it in a way that is easy to be removed. Keep a door between units, or maybe have one wall that is easy to remove that opens it back up. Then when I go to sell, I can either convert it back to a single-family home at low cost, or leave it as two units depending on what the market is demanding.

Chris Barrett · Answer

There's less people buying 2 flats, therefore there's not as much competition to buy. A comp based appraisal is going to be based on comparable sales, so yes.