Sprinkler threshold turned a 40k code budget into 106k on a 9 bedroom conversion

Under contract at 288k on a nine bedroom house in an older neighborhood, currently rented whole to a single household at 2,650. Plan was to license it as a rooming house and run nine rooms at 700 to 750, so call it 6,500 a month gross at 95% of the roll.

I budgeted 40k for code work off a walkthrough with a contractor I've used four times. Hardwired interconnected detection, door hardware, two egress windows in the rear bedrooms, kitchen upgrades, panel work. Fine.

Then I sat down with the building department. In this jurisdiction the occupancy count I'm proposing pushes the building into a different classification, and that classification carries automatic fire suppression. Bids so far: 71k and 84k for the system. The 84k includes a water service upgrade because the existing tap won't support flow, and the 71k one doesn't include it, which I think means the 71k is not really 71k. There's also a second means of egress question on the third floor that the plans examiner flagged but didn't rule on, and the contractor's rough number on an exterior stair is 22k.

So I'm at 106k to 146k of code work against a 40k budget, on a 288k purchase.

Options I can see:

Reduce the room count to sit under the occupancy threshold. Seven rooms instead of nine. That's 5,100 gross instead of 6,500, and I lose 1,400 a month forever to save maybe 90k once. Payback on the suppression spend is roughly 64 months on gross, worse on net.
Eat the full cost. Total in around 400k plus soft costs, on a building that appraises as a single family house in a neighborhood where single families trade in the 290s. No lender is going to love that gap.
Walk. I've got 6k of inspection and design money in and a diligence deadline in eleven days.

What I don't know yet is whether the third floor egress is a hard requirement or an examiner being cautious, and whether the water service upgrade is a tap fee problem or a main-in-the-street problem. I have a flow test scheduled Thursday.

Anyone who has actually built one of these through a suppression trigger, I want to know what the number really landed at and what I'm not asking.

Answer

1gregpowell66AG4BPRO8

Get the flow test result before you think about anything else, because it decides which of your two bids is real. If static and residual pressure at the street support the system with a 1.5 or 2 inch service, you're paying a tap fee and a short run of pipe. If the main is undersized or old cast iron at low residual, you're either into a pump and a tank or into the utility's schedule for a main replacement, and neither of those fits an eleven day diligence window.

On scope, ask both bidders in writing which standard they designed to and why. A residential-style system in a building the code treats as residential occupancy is a very different install cost from a full commercial design with its own riser, backflow, monitoring, and annual inspection contract. The classification your plans examiner assigned drives that, so make him put the classification in an email. That email is also what settles your third floor stair question, because egress requirements follow the occupancy classification and the number of occupants per story, and an examiner who won't commit in writing is telling you he hasn't decided.

The number people forget is the monitoring and testing after. Annual inspection, backflow test, monitoring line. Budget a four figure recurring cost, and remember any fire pump you install becomes a maintenance item with its own inspection cycle.

Also get your 22k stair number checked against the foundation for the landing and the frost depth. Exterior stairs come in over bid more often than anything else I've priced.

4 replies

1angela_burkeServicePRO6

Your option 1 math treats seven rooms and nine rooms as the same operation and they're not. Nine rooms on one kitchen and however many baths you've got is a materially harder building to run than seven. My crews service a couple of these and the complaint volume per resident goes up as the shared fixture ratio tightens, so the 1,400 you'd be giving up comes with hours you'd be giving up too.

I'd price both scenarios with a real management line, not a percentage. Weekly presence, common area cleaning twice a week, and turnover labor. If that's 900 a month at seven rooms and 1,300 at nine, your 1,400 gross gap narrows to something like 1,000, and 90k of avoided spend starts looking better than your 64 month payback suggests.

1jordan_ellis2ActivePRO6

The thing I'd want to know is how the 40k got set. A walkthrough with a contractor you trust is not a code review, and the occupancy classification was knowable on day one from the ordinance and a phone call. That's not a criticism you can use now, it's the checklist item I'm writing down for myself.

On the eleven days, can you buy time? An extension with some money hard, or an amendment that makes closing contingent on the classification letter and the flow test. If the seller won't extend, that tells you something about how many other buyers are in line at 288k.

1aaron_fitz10 Get yoursPRO6

Nobody's said the obvious thing so I will. It's already rented to one household at 2,650 and you're contemplating 400k all-in to get to 6,500 gross in a market where the building comps at 290. Strip the boarding house plan out entirely and you have a 288k house producing 2,650 with no license, no annual inspection, no sprinkler contract, and no shared kitchen. Is that a deal you want? If yes, close on that basis and treat the conversion as a maybe in year three when you've got the flow test answer for free. If no, then the whole thesis was the 6,500 and you should walk before Thursday costs you more.