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Converting a Single Family Home to a Multifamily Property

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If you are a regular reader of this blog, then you already know that small multifamily properties are, in my opinion, the best type of investment property for the average “small time” landlord.  However, you do not necessarily need to buy an as-is multifamily property.  In fact, in many cases it can be cheaper to buy a single family home and then convert it into multiple units.

If you are considering purchasing a property for this purpose, your first step is to check local zoning regulations to make sure that this is allowed for any property you are targeting.  Some areas of town will inevitably be earmarked solely for single family homes, and some for commercial property.  So you’ll need to check this upfront (i.e., before closing).  The best way is to go online, as these days most municipalities have their zoning maps posted.  If not, then you can either check at the local city hall or hire a real estate attorney to look into this for you.

Assuming you’ve found a single family house in an area that allows multifamily dwellings, the next step is to decide how many units you’ll convert to.  There are a couple of rules of thumb around this.  First, you’ll want the house to be large enough to accommodate multi-bedroom apartments.  Single-bedroom apartments are more difficult to manage, as they tend to attract a bit of a transient population and as such they tend to have higher vacancy rates.  Plus, you can obviously get more rent for a multi-bedroom apartment.  As you calculate your total space requirements, don’t forget to factor in the fact that all apartments must have a bathroom, kitchen, and closet space.  Additionally, don’t forget about the changes that will be needed on the exterior of the property; for example, expanded parking areas.  In many cases it might be helpful to seek advice from an architect as you are figuring all of this out.

Ok, you’ve found a property in the proper municipal zone, and you’ve determined the structural requirements and number of apartments to create.  The final step is executing the project.  You’ll want to get at least 3 bids from general contractors.  You’ll want to compare pricing as well as experience, timing, and similar factors.   Also, make sure each contractor is adequately insured, and that there will be no funny business with regards to getting all the necessary permits.

To sum it up, if your strategy is focused on buying single family homes and converting them to multiple units, you must do your homework.  Check local zoning regulations, create the blueprint, and get bids from at least 3 contractors.  Good luck!

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