Single-family to Multi-Family Conversion: Pros and Cons
For real estate developers looking to convert a single-family home into a multi-family dwelling, there are some benefits and drawbacks. These are the issues that they need to be aware of before planning for the conversion. Restructuring a single-family home into multiple units requires advanced planning for the layout and awareness of local ordinances. In addition, there are other considerations that we will discuss below.
Single vs. Multi-Family
Among the variety of home styles that real estate developers can rent out to tenants, single-family and multi-family dwellings are two main options. To begin, single-family homes are often much cheaper, and therefore easier to finance and require a smaller down payment. Multi-family homes, which can be apartment complexes, duplexes, condos, and more, are often bigger than single-family homes. Therefore, you need to lease them to multiple tenants, which can get tricky when vetting quality renters.
Single-family homes allow you to be choosier with your tenant selection and often have fewer vacancies than multi-family dwellings. The maintenance may be less of a burden for single-family homes. However, homeowners aren’t able to collect as much rent as they could with a multi-family property. Additionally, it’s harder to scale your real estate investing when only owning single-family homes. The reason is that it requires developers to continually find new properties, finance them, and keep multiple locations maintained.
Drawbacks of the Process
When converting a single-family home into a multi-family property, there are some challenges that developers will face. In making multiple units out of a single home, there may be difficulties when planning the layout for each new unit. This is because the original house likely has only one kitchen and limited bathrooms.
It also may not be possible to separate utilities to each unit, so it may become the responsibility of the owner to cover them all. Plus, ensuring that each unit has proper heating and ventilation, fire escapes, and electrical wiring to support multiple appliances should be a top priority for developers.
Benefits of the Conversion
To owners of single-family homes, converting it to multiple units increases earning potential. Also, it allows costly vacancies to offset each other when the majority of units are full and still providing rental income. In addition, there are also benefits to the local community. Taking large, expensive, and vacant homes and turning them into multiple, affordable units can help out areas with housing shortages. Communities and neighborhoods across the country are changing and adapting to current times. Therefore, converting single-family homes into multiple units can be a win-win for both developers and communities.
From college towns to booming cities, there may be a need within the community to take large and vacant homes and convert them into something more useful to the residents of the area. Taking note of possible zoning restrictions and ensuring safety for all units is of utmost concern for developers, and in considering the challenges listed above, developers can successfully maneuver through this process and increase their earning potential.
In case you have architectural, structural, and MEP design requirements for your single-family or multifamily requirements, or need an ADU or modular design for your home, feel free to contact us. We provide you with the full permit set design + T24.
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Bailey Schramm is a writer from Happy Writers, Co. in partnership with outdoor kitchen cabinet retailer, Werever.