Conversions (2/3/4 plex) to multiple single studios?

[Seth S.]

Hey BP - 

I am coming across a few properties here and there that have a duplex/triplex/fourplex conversions into multiple "efficiency" apartments (studios). Even though the numbers do look good on paper, I was wondering if anyone has has experience with those. 

Some of my concerns: 

- Most of those, the owner pays utilities 
- Smaller units might be harder to rent for decent amount of money (unless well located?)
- Legality of having that many units under 1 roof (aka, did the conversion happen legally or did the owner just do it without any permits/permission)
- If the zoning was for a duplex, and now there is 5 apartments, does that make it a commercial property?

Thanks in advance, 

S.

[Adam Mayberry]

Hey @Seth S. - I know a lot of these buildings are done in San Jose, most without permits - shoot me a message and I could check up on them for you.

Most of the time, when you have a 2 bedroom each triplex, you could get more per room renting to individuals than renting to a group of 2, thats why people create the studios. Studios typically rent for more per SF than larger units, but there is some give and take depending on the actual property.

My understanding is that 4 units and below qualify for traditional 30 yr mortgage, like a home, and they appraise the same way, like a home, with comps in the area.