Single Family Property Rented as a Duplex - A "Waldo" Question

Single Family Property Rented as a Duplex - A "Waldo" Question

Rental Property Investor · Payson, UT · Member since 2016 · 68 posts · 11 votes

Looking for some advice. I am an investor (and a newbie to the forum). I've spent 5 hours doing my own research on this specific topic already so I hope I'm not wasting anyone's time. I've got a potential opportunity to purchase a "waldo" property. 

It is a 6 bed 3 full bath single family residential home with two separate "units" (3 bd 2 bath up & 3 bd 1 bth down). The zoning is single family residential (R 1-9 in Utah terms). The neighborhood is all single family residential. Through reading the forums it appears the pros to a SFR "conversion" to duplex is cash flow (and it appears to cash flow great). Cons are zoning and difficult resale.

My questions are these: Should I be worried about the potential for me buying this and zoning enforcement coming after me if I rented it out to two households? Is this common for investors to do? If it's been done for years, does that sort of tell me neighbors are okay with it? Am I missing any pros or cons? 

Your help is super appreciated. 

More supporting information about the property: The home was built in 1999. The tenants have done surprisingly well to keep it clean. There is only one gas meter, one water heater, 2 furnaces, 2 separate laundrys and kitchens. The seller has rented it out as a duplex for 6 years. The upstairs is even on section 8 housing for $1050 per month. Downstairs is month to month at $800. The lot actually has a huge 1100 sq ft insulated garage in the back yard which is in addition to the attached two car garage in the front yard. Ideally I could rent that garage out separately as it also is right off the street (perfect for a hobby mechanic shop scenario). 

Here's a top view of the layout. That big rectangle is the shop. 

 The backyard is basically this shop plus a driveway for the basement tenants (basement entrance in the backyard with their own driveway). There is plenty of off street parking in the garages (6 garage spaces in total) plus two driveways.

Thanks for taking the time to help out a newbie to the forums. 

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Investor · Provo, UT · Member since 2015 · 16 posts · 19 votes
10y

No reason to take a risk on this.

1. No way to add value to this property. (In fact, you might have to remove value.  My neighbor had to remove a kitchen in Provo after he owned it 2 years.  It just takes one neighbor to complain to the city)

2. 1999 was in the middle of the golden age in Utah for ultra fast/cheap construction. 

3. There doesn't appear to be any setbacks or street parking.  It does not look like a neighborhood that will age gracefully. (In 20 years, is someone going to spend money to fix up a house on a lot with no yard?)

4. One water heater is not enough for 2 washer and dryers and 6 bed/3 bath.  You will probably get cold water complaints in the winter.  Its also extra work to divide up bills every month.

5.  Why go to bed every night worrying about zoning issues?  You are buying a problem that will always be a problem to sell or refi.

I would only buy it if you really wanted to use the shop yourself. and at 80% of the single family res price.  There are much better long term holds in Utah County.

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  • Rental Property Investor · Payson, UT · Member since 2016 · 68 posts · 11 votes
    10y

    Also, on one of the forum posts I read it said that conventional lending may not lend on a SFR with a 2nd kitchen for insurance reasons. Does anyone know about that? Why would that be? A lot of the homes in Utah have basement kitchens and "Mother-in-Law" apartments and I can't imagine they'd turn down lending on the 10% of homes that do?

  • Investor · Provo, UT · Member since 2015 · 16 posts · 19 votes
    10y

    No reason to take a risk on this.

    1. No way to add value to this property. (In fact, you might have to remove value.  My neighbor had to remove a kitchen in Provo after he owned it 2 years.  It just takes one neighbor to complain to the city)

    2. 1999 was in the middle of the golden age in Utah for ultra fast/cheap construction. 

    3. There doesn't appear to be any setbacks or street parking.  It does not look like a neighborhood that will age gracefully. (In 20 years, is someone going to spend money to fix up a house on a lot with no yard?)

    4. One water heater is not enough for 2 washer and dryers and 6 bed/3 bath.  You will probably get cold water complaints in the winter.  Its also extra work to divide up bills every month.

    5.  Why go to bed every night worrying about zoning issues?  You are buying a problem that will always be a problem to sell or refi.

    I would only buy it if you really wanted to use the shop yourself. and at 80% of the single family res price.  There are much better long term holds in Utah County.

  • Rental Property Investor · Payson, UT · Member since 2016 · 68 posts · 11 votes
    10y

    Thank you Randy for the feedback. I appreciate the advice. 

  • Real Estate Agent · Highland, UT · Member since 2015 · 407 posts · 272 votes
    10y

    @Chris Watkins I believe your license would be at stake for knowingly renting a home that isn't a legal duplex because as am agent you should "know better".

    Utah housing which is a 100% loan program will not lend on homes with second kitchens knowing people will rent them out.

  • Rental Property Investor · Payson, UT · Member since 2016 · 68 posts · 11 votes
    10y

    That is a good point I hadn't thought about - as a new agent I am grateful you would bring this up. Thank you. 

  • Investor · Socal · Member since 2015 · 222 posts · 34 votes
    10y

    people living under the same single fam roof/dwelling don't routinely collect RENT from the rest of their family as  LANDLORD-TENANT relationship(s), even if it is their MOTHER IN LAW =D

    thus, while the house may have a grandfathered (or grandparented to be more PC?) mother-in-law, mother-daughter, jack-and-jill, 'Summer Kitchen' and/or maid's quarters yada yada  - as many mansions and other estates traditionally do -  if its a SFD that means per code/ordinances etc u cant rent separate tent dwelling/apartments within it - only maybe a room or so.

    thats why instead, large SFDs with a duplex layout (or maybe even a 'back house') to spare will 'rent out a room' to avoid grossly breaking zoning and C of O rules for a single fam dwelling. of course that means either the kitchen is inherently shared or one of the persons (ie, a college student, or a raw vegan) simply does not need access to a traditional kitchen whatsoever.

  • Tyler, TX · Member since 2015 · 85 posts · 24 votes
    10y

    MILs are not meant to be full units. Is this structure permitted? Usually accessory structures are limited to 30% of the rear yard and must be accessory to the primary structure. Allowing a guest house is one thing, renting it out to another family is another. This is a zoning violation, I guarantee you. If it was built in the early 1900s, I'd say there's a chance for grandfathering, but 1999? No way. Possibly an illegal built, but definitely an illegal use.

  • Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
    10y

    @Chris Watkins

    The rentability of accessory units or "mother in-law apartments" is regulated by the municipality.  Some cities allow for an owner occupant to collect rents from an accessory unit.  Some don't.  If you are not going to occupy this, you will be using as a duplex which it may never legally be.  Talk to the city about how you may use the two units.

    @Randy Scott makes a good point and I've run a lot of comps.  I have not found anywhere in Utah where the second kitchen increases value because more often than not, people looking for homes like this would prefer the extra space for larger families than somewhere to stash a mother-in-law.

    I have not seen any negative repercussions regarding licensing.  Zoning is municipal and licensing is state.  Offenses have to be much more egregious than this for different levels of government to get involved.

    Good luck.  

  • Real Estate Agent · Highland, UT · Member since 2015 · 407 posts · 272 votes
    10y

    @William Hochstedler I should clarify it would be membership as a Realtor that if turned into the board could be lost. Not so much the real estate license. It would be a very vindictive person to follow it that far. I do know when it comes to selling one we have to be very careful how it's advertise the home. That could be a whole different matter. I personally stay away from it. 

  • Rental Property Investor · Payson, UT · Member since 2016 · 68 posts · 11 votes
    10y

    Wonderful input, thank you for taking the time to provide your experience and insight. I'm checking with the city today on this. 

  • Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    I've never been an advocate of "make money any way you can", especially when doing so would be knowing it's at least unethical or worse, known to be illegal.  You're not alone in this approach as other are advocates of anything to drive up profits.

    It's only your reputation . . .

  • Rental Property Investor · Payson, UT · Member since 2016 · 68 posts · 11 votes
    10y

    @J Beard, I understand your concern and agree with you to a certain extent although I don't consider someones reputation to be destroyed because they drive 60 mph in a 55 zone - going over the speed limit is also known to be illegal and could be considered un-ethical. Being recently exposed to the SFR duplex idea and asking the experts what they think about it doesn't make me un-ethical. I do understand and appreciate the end goal of zoning ordinances such as that of SFR's to maintain the quality and the value of the neighborhoods - which is why I am asking about this. Thanks for the perspective though.

  • Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    IMO, which is very conservative as I will soon make self-evident, there are some topics that, the willingness to discuss as a viable alternative an unethical or illegal act, does indict one as being unethical.  It's much like being pregnant - - you or or are not, you are ethical or not.  Neither has room for a third condition.

    Yes, this makes me judgmental and opinionated - - sorry, that's my choice.

    Your choices are up to you but thought you might consider such that may not have been self-evident previously.

  • Rental Property Investor · Payson, UT · Member since 2016 · 68 posts · 11 votes
    10y

    Interesting opinion. Thanks for your thoughts on the matter. I disagree with your statement, because an unethical person wouldn't call the city to ask them about the property and zoning. But, to your point, I recognize the value of erring on the side of caution. But if I never even considered it, I would never know what the city would allow. What if the property is in a single family neighborhood but is allowed to be a duplex per the city/bldg permits/ or whatever. You never know until you ask. I know someone who bought a nice house in a great neighborhood with an exception letter from the city stating they can legally rent it out as a duplex. You never know until you ask. 

  • UT · Member since 2013 · 164 posts · 55 votes
    10y

    @Chris Watkins what did you end up doing?

  • Rental Property Investor · Payson, UT · Member since 2016 · 68 posts · 11 votes
    10y

    Checked with the city, they came back with no flexibility and that, even with the chance of applying for the zoning change, it would never go through due to configuration of the property. So I passed on the deal. 

  • Rental Property Investor · Provo · Member since 2019 · 1 post · 0 votes
    7y

    https://www.utah.gov/pmn/files/284821.pdf

    Just happened to come across this record while doing some research.

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