Who would buy a nice, huge house? (sale, real estate)

[Jorge Campbell]

I am rehabbing a huge house with the potential to be split into 3 units of 2-3 bdrs of average quality each, or fixed into a very nice sfh with 7 bdrs/5bas to sell for maybe $220k+ based on comparables. It is in an average public school district but is very conveniently located. The house already has a solid fire escape installed. It does lack private parking for now and has a tiny back yard (another thread about this house: //www.city-data.com/forum/pitts...back-yard.html)

My business partner thinks the 3-unit apartment option is the way to go. The house was a personal care home before, so all the utilities are already in the right places, most of the interior walls can stay in place, and it has the fire escape too. I will have to apply for a special use through the local zoning hearing board, and figure out parking. Total investment will be about $35k-40k/unit.

I, on the other hand, think that the house can be turned into a very nice 7/5 over 6,000 sqft. The primary drawback is the small back yard and current lack of on-site parking, although a parking pad might be able to be squeezed in. The fire escape will have to go and a back deck installed. Total investment will be similar to the 3-unit option.

My partner and I disagree on who would buy such a huge SFH. He says that the utility costs for the SFH option would be a turnoff (although I think utility costs might be reduced with HVAC zoning), and people just don't have such big families to require 7 beds. However, the SFH option would offer the better ROI... if it can be sold. Any thoughts?

[guy2073]

Without knowing the location it is hard to tell you. I like to offer one of my reality friends some cash to run any house that I am looking at. Once you know the local comps and rental prices you can proceed with a budget and a plan that would work.

[sskink]

Not sure how you're figuring out ROI (or over what length of time), especially if your sale price is only $220K. The rental market is very tight and as long as your property isn't in a horrible neighborhood, there shouldn't be difficulty renting 3 units. You would have ongoing maintenance, but your pricing should cover that. You would want to somehow try to get three off-street parking spaces.

Another option might be to sell the place to someone who wants to live in one unit and rent the others to live basically mortgage-free (I have a friend doing this in MWS, who promotes his open units on AirBnB when he doesn't have a tenant).

As far as energy costs go, check with Duquense Light or a company like Green Mountain Energy for alternatives and things like rebates or small grants (which would probably be easier to attain for an apartment conversion than a SFH).

Selling it as a SFH would imply a larger family or extended family. The lack of a yard makes the house a very unappealing option for such a buyer, IMO.

[Augie6]

Lots of unknown factors..Location is a huge issue. I couldn't imagine how renting it out wouldn't give you a much higher ROI.

[bluecarebear]

Parking is another huge problem. Every day it's getting worse trying to find decent parking in neighborhoods. I wouldn't want to rent or buy an apartment or house where I wasn't guaranteed at least a spot.

[guy2073]

Originally Posted by bluecarebear

Parking is another huge problem. Every day it's getting worse trying to find decent parking in neighborhoods. I wouldn't want to rent or buy an apartment or house where I wasn't guaranteed at least a spot.

You have to watch out if you make it a 3 unit, you could have to find parking for 6 cars

[Jorge Campbell]

Parking is definitely the issue with the borough. They think there are currently too many apartment units in the area, which brings down property values and creates a street parking problem. I talked with the inspector who nixed the triplex idea in the bud. He said that 2 off-street parking spaces must be created for each unit, so even if it is turned into a duplex, off-street parking space is still the issue.

I have to discuss further with the inspector to see if we can work out on-site parking to the side of the house/lot; it'll be somewhat of a tight squeeze though, but I might be able to fit a 2-car driveway in depending on how the inspector feels.

Originally Posted by Augie6

Lots of unknown factors..Location is a huge issue. I couldn't imagine how renting it out wouldn't give you a much higher ROI.

If I flip it and put in a total of $150k, I can probably sell it for at least $220k, and probably finance it for somewhere around that amount while renting the house out as a whole for market rent, bringing a profit potential of at least $70k (not counting the rent and before taxes if selling).

If I fix it up as a duplex for $100k and hold it, gross monthly rent will be appx. $2k, annual rent pre-tax is probably around $20k, meaning a ROI of 20% annually. This is why I'd rather turn it into a SFH than a duplex, but let me know if you think my numbers are off or if you disagree with my assessment.

[guy2073]

If it was my place I would get an appraisal on the house with the improvements that you want done, there is nothing worse than flipping a home and not having one bank that will finance it. I am really safe with my real estate investments. I don't like to gamble.