You might be considering dividing a single-family home to generate additional income or increase property value. Depending on the type of conversion, dividing a home can offer numerous benefits.

The main options for multi-family homes:

• Duplexes, triplexes, and fourplexes
• Apartment buildings
• Condos

5 Steps To Divide a House

Wondering ​​how to legally turn a house into a duplex or a multi-family property? These five steps are a great start at evaluating your readiness for the change.

1. Check Zoning Laws
   1. A lot of single family homes aren’t in areas zoned for multi-family use. Laws vary by location, so you’ll need to check with your local zoning commission to have your zoning changed. After that, you’ll have to obtain necessary permits to move forward with the conversion.
2. Check Requirements for the Property Type
   1. There are certain requirements for homes to be considered liveable. These are often specific to your area, so be sure to check with your local building office to confirm what is needed. This may include things like having at least one exterior door, plus a bedroom, bathroom, and kitchen in each residence. You’ll also likely need separate gas, electric, and water meters in each unit.
3. Hire the Right Professionals
   1. Do your research! Hiring the best possible architect, contractor, and designer to help you convert your property can make a world of difference.
4. Follow Safety Requirements
   1. Based on local building and fire codes, you’ll need to make some adjustments to the new units. For example, you’ll have to install smoke detectors in each residence and have working fire exits. 
5. Update Legal Documentation/Tax Records
   1. After the conversion, be sure to update property records. You should also speak to an accountant about how your taxes might change.

How to Check Your Zoning

To check your zoning laws, call or visit your local City Hall. Many people turn to a land use attorney or planner to help guide them through their conversion, including checking the zoning laws.

Pros & Cons

There are many factors to consider when evaluating your effort and return with a move into a multi-family property. It’s a valid conversation worth having if you are looking to invest in your home and build equity. Here are the top level pros and cons to get you started.

Pros

• • Generate more income: Renting out multiple units can open up income opportunities.
  • Raising property value: Expanding the dwelling capacity typically adds to the property value.
  • Multi-generational family use: Converting a home for multi-family use allows several generations of families to share one property.
  • Tax benefits: Rental properties benefit from tax deductions that single family homes don’t receive.
  • Space Utilization: Particularly in urban areas where square footage is at a premium, a multi-family property utilizes space more efficiently.
  • Fewer Financing Limitations: While single family homes often have loan caps, multi-family properties are flexible and based on the rental income of the tenants.  Learn more about home loans, including conventional, USDA, and FHA loans.

Cons

• Initial costs: Converting a single-family home into a duplex or multi-family property requires a lot of upfront costs, from appliances to expansions.
• Long process: This isn’t something that can be done overnight. From getting the zoning permits, to separating the property, a conversion can be a months-long process.
• Maintenance and Management: You’ll take on more responsibility when you own multiple units, vs. a single family home. You also might have increased maintenance costs. 
• Market Risk: Fluctuations in the market could make it difficult to rent out the additional units.
• Resale Complications: You might have more difficulty finding a buyer for a multi-family property.  

Consider An ADU Build

Rather than a duplex, you might be able to build an Accessory Dwelling Unit (ADU). This is a smaller residential unit located on the same lot as a primary single-family home. It can take the form of a cottage or guest house, or it can be attached to the home. An ADU can also be a converted garage, basement, or attic. 

Typically an ADU is self-sufficient with a private kitchen, bathroom, and sleeping area. The beauty of an ADU is that it often requires fewer zoning changes, so it’s easier to set up and manage.

Additional Notes: Appreciation & Taxes

The home value and property taxes for single and multi-family homes can greatly differ. Single-family homes to tend to appreciate much faster and have a limitless ceiling in comparison to multi-family homes. 

Property taxes will likely increase as you update your home and add additional units.

Is A Conversion The Route For You?

Whether you should do a conversion or not is truly a question based on what your goals are for the property. Converting a single family property can be a lengthy and expensive process, but if you want to rent out the units, it can also be a great strategy to generate income.