Building extra bedroom to make a 2/1 a 3/1 ?
I have recently acquired a 4 plex in Tampa which has 4 2 bedroom 1 bath units which equal 850 sq ft each. The way the Quad is constructed is 2 units on the first floor and 2 on the second floor. My idea was to knock down part of the wall from one 2/1 unit and take away a 10 x10 area to add it to the other 2/1 unit so I can have a 3/1 unit. This would allow me to have (2) 2/1 units with 750 sq. ft and another (2) 3/1 units with 950 sq. ft. The current market rents are $850 per unit for 2/1 while they are $ 1,200 for 3/1. Since I purchased the property for a steep discount I have the ability to convert the units and allocate the build out of the additional room. By moving froward with this approach squeeze more income out of the property with minimal work .I am trying to figure out if there are any issues or obstacles that I am unaware of. Any thoughts ?
Then after I carry this out I would like to refinance the property and pull out 70 % LTV. The typical 2/1 units sell for $65,000 in this market (C, C- area). If I convert the units to 3/1 and will the bank appraise the property with the larger units as more valuable ?