Buying a 2 unit in Baltimore to zone for a 3 units.

8 Replies

Buying a 2 unit in Baltimore wanting to zone for 3 units.

Hey Bigger Pockets need some help.

3611 Fairview Ave Baltimore 21216

Let me give you the deal breakdown I bought this on hubzu for $81,900

Rehab $70,000

Rent roll $2,000 for both units

Zoned R-1 passed for duplex

ARV $251,333

There’s space for a third unit on the basement area but how are would it be to get it zoned in Baltimore and does it not being zoned for 3 units bring down the value of the property?

@Greg Grant

Very simple. Yes, having a non-permitted 3rd unit does restrict the resale value of the property, because you or a future buyer could be required by the City to eliminate your 3rd unit and by extension the income from that unit. What are the chances of that happening? Well, you could last for years with no issue, or a single problem neighbor could shut you down in weeks. The ideal thing to do in this situation is to control the property, straighten out the zoning, and then proceed to closing.

Since you already purchased the property, you might consider reaching out to Administrator Geoffrey Veale in the Department of Zoning and applying for a variance. One of the three best ways to change zoning is to argue that there has been a mistake. For example, if the 3rd unit has been there for a long time, your best argument may be to contend that the 3rd unit should be “grandfathered in”.

As an alternative, consider expanding the 1st floor unit into the lower level. You will save on building cost because you won’t need to pay for a new kitchen; and with the expanded space, you’ll likely enjoy less tenant turnover. Plus, you’ll be able to charge more for the 1st floor unit because of its expanded space, at a lower management cost (one tenant is easier to manage than two). As a commercial real estate developer with 27 years in the business, I nearly always opt for fewer, larger, higher margin units over more, smaller, lower margin units. After all, real estate is supposed to pay for your life, not be your life!

I would also look into things beyond just the zoning.  Maryland is very strict in terms of fire sprinkler code.  Most older places have a 3/4" copper line coming from the outside.  For fireflow you need to upsize that which means a utilty company to upsize from the main in the street to the meter, getting a plumber to install a meter and a backflow preventer along with a branch stub for a sprinkler company.  The size increase just to the building from the main can be 10k or more.  The plumber can be a few thousand and the sprinkler company in an existing building can be 3 or 4 dollars per square of square footage.  Keep in mind they might make you upgrade not only the space that you are making a unut but the others as well.  So if each space is 1000 SF and there another 500 sf of common area thats 3500 SF at 3.50 per SF.  Thats over 12k.  Thats over 25k when added to the other costs associated with the sprinklers.  Also keep in mind egress windows can cost 5k though that also adds value through lighting up the space.  This is assuming you have adequate head space of 7' which Im assuming you do.  If you dont you are looking at much more cost to lower the foundation floor.

Id look into the sprinkler issues at the city as it would suck to go through a variance process only to have the thing become financially unfeasible from other requirements.