A triplex that was legally a duplex is a case worth studying before writing any offer on an old building
This is one of the more expensive lessons in small multifamily, worth laying out with its numbers because the mechanism repeats. Say a 1920s two-story in an older streetcar neighborhood is marketed as a triplex. Up, down, and a garden-level unit with its own entry, kitchen, bath, and electric meter. Rents at 1,150, 1,100, and 875, so 37,500 gross. Purchase price 388k with 25 percent down. In-place NOI after real expenses around 23,600, just over a 6 cap, in range for the target. The appraisal comes back at 391k and reads two units plus a finished lower level. That's a signal, not a footnote. A lender saying the appraiser used comparable sales and the value supports the loan is true and beside the point that matters, which is unit count. A seller's disclosure claiming three units is doing a job it can't actually do. The move that gets skipped far too often is pulling the permit record on the garden unit directly from the city before writing the offer. What tends to surface later, often when a permit application for something small like an egress window replacement gets filed, is that the city never approved the lower level as a dwelling unit. The path to legalize, where one exists, often runs into ceiling height and egress requirements, a separate heat source, and real construction costs, say 34k on a 6-foot-11 ceiling that can't legally get there without lowering the slab. When the garden unit stops being income, a tenant relocation with payment, say 2,400 plus a returned deposit, drops gross from 37,500 to 27,000 and NOI from 23,600 to roughly 15,800 on the same expense base, since taxes, insurance, and the roof don't care how many units get rented. A planned refinance stops sizing on two-unit income at a higher rate, with the same appraisal that was fine as a purchase document now acting as the ceiling. Carrying negative for over a year before selling at a loss is a realistic outcome, with a total cash cost that can run past 40k once the price gap, lost rent, relocation, negative carry, and permitting and legal work are totaled. The rule that holds: before writing an offer on anything sold as a 3 or 4 unit in an older building, pull the permit and zoning record on unit count directly from the city, in writing, and read the appraiser's unit count as a warning rather than a formality. When the record and the rent roll disagree, the rent roll is the one that's wrong.
