Sprinklers and parking are eating the third unit I wanted to add

Question

I've got a duplex with a full-height unfinished basement, roughly 900 square feet, separate exterior entrance already there. Framing a third unit down there is straightforward work for me. My build number is around $95k all in including a second sewer connection and a new panel, and comparable one bedrooms in that block rent about $1,450.

Where it falls apart is the ordinance. At three units my jurisdiction wants one off-street parking space per unit, and the fire code review triggers a sprinkler question that a contractor friend priced in the high teens for a residential system retrofit. I have space for two cars, not three, so I'm looking at a variance request with no idea of the odds.

The part I can't figure out is whether the money comes back. Three units is still residential financing, so I keep the loan advantage. But if the refinance appraiser values the property off duplex and triplex comps rather than off the added income, I could spend $115k and see $60k of value. Anyone worked through the appraisal side of a unit addition on a small building?

jordan_ellis2 · Answer

The refinance appraisal would go on the 1025 form, same as a purchase, and the sales grid carries it. So your question is really whether there are three unit sales nearby with a similar unit mix. If the only triplexes that traded are three-bedroom-each buildings, your two-plus-one basement mix gets adjusted down and the income never fully shows up.

Separately, price the variance timeline, not just the odds. In the towns I've been reading through, a use or parking variance is a hearing calendar, published notice, and sometimes a continuance, so figure months before you can even order materials. Your carrying cost during that stretch belongs in the $115k.

ehernandez74 · Answer

Two things I'd want nailed down before the framing question. Your insurance carrier has to agree to write three units at that address, and some carriers treat a basement dwelling differently or want the sprinkler system documented. And the assessor will revalue after the permits close, which in a lot of states means a reassessment at the new use, so your tax line moves and it doesn't move back. I'd ask the assessor's office directly what a permitted third unit did to comparable properties before I counted on any of the $1,450.

Sprinklers and parking are eating the third unit I wanted to add

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