Converting Single Family to Multi Family: Is it Right For You?
Posted by Edmonton Homes.ca on Tuesday, October 3rd, 2023 at 9:32am.
Do you find yourself dreaming of a larger, more profitable home? Whether you're looking for an investment opportunity or want to make the most of your space, converting your house into a multi-family home or buying an existing one could be the answer. There are countless reasons to love living in a multi-family community, but if you’re thinking of purchasing or converting a home into one, be sure to explore the pros and cons of doing so first.
Reasons to Convert a Detached Home into a Multi-Family
Converting a detached home into a multi-family property can provide many benefits, such as increased rental income and reduced mortgage payments. And if your chosen home benefits from the common characteristics of split-level architecture, the conversion process can be fairly simple.
By transitioning from a single-unit to a dual-unit setup, you can own the property while earning rental income from your tenants. This is known as 'house hacking' and can be incredibly beneficial for investing in real estate. In addition, having two separate units allows you to offer lower rent rates, making your property more attractive and affordable for potential tenants. This leads to a consistent stream of income over time.
Ultimately, converting your home into a multi-family dwelling gives you access to additional funds you wouldn't have otherwise had—allowing you to pay off any mortgages faster.
How Easy Is it to Convert a Home?
It can be challenging to turn a single-family dwelling into multiple units. Depending on the size and condition of the home, it can be quite a challenge to convert it into two or more separate living spaces. However, the ability to do so is one of the reasons to choose a detached home when deciding between a condo and a house.
You'll need to consider zoning laws, building codes, and other legal requirements. If you plan on converting your existing detached home, you may need to apply for permits from the local municipality to ensure the changes are up to code.
Aside from legal issues, there are also financial considerations when converting a home into a multi-family unit. Development fees can add up quickly, as can any necessary renovations or upgrades needed for the conversion process. It's important to research all potential costs before deciding whether this option is viable for you.
Determine Your Costs & Potential Returns
Calculating the costs and potential returns of converting your residence into a duplex can help determine if this is viable.
To evaluate this option, start by calculating the initial costs associated with the conversion process. These include any permits or fees required for unit separation and the materials and labour needed to complete renovations. It's also important to factor in holding costs, such as taxes and insurance payments during renovations.
Additionally, consider how much rental income could be generated from two units versus one single-family dwelling. Once these figures are known, you can compare them to determine if the conversion is financially feasible.
Finally, remember that legally established duplex homes tend to have stronger resale potential than non-conforming properties. By taking stock of these factors before proceeding with a multi-family home endeavour, you'll ensure that your investment offers maximum returns in rental income and future sales profits.
Reasons to Buy an Existing Multi-Family Home
Considering an existing multi-family home can be a great way to enjoy the benefits of real estate investing without the hassle of conversion. Buying an existing multi-family property might be more affordable than purchasing a single-family home and converting it, making it more affordable for investors.
You don't have to worry about zoning or laws when you buy an existing multiplex since all the necessary permits are already in place. If you plan on living in your multi-family home, there will be no construction period—you can move right in. By investing in an existing multi-family property, you will benefit from immediate rental income while gaining long-term appreciation potential. This is because most tenants prefer to rent in established properties that offer better amenities than what they could get in newly converted units.
Long-Term Passive Income Awaits
Before deciding, you'll need to weigh the pros and cons of each option. Converting a home into a multi-family property can be time-consuming, but it may also be worth it in the long run if you're looking for investment potential. On the other hand, buying an existing multi-family home could save you time and hassle.
Ultimately, it's up to you to decide which path best suits your situation—just make sure you research and follow your gut. Whether you decide to buy an existing multi-family home or convert a home into one, making the right choice for you will have you on your way to long-term rental income.