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February 2, 2005

Discussion: Market Value of a 2-Family vs 3-Family

After revealing on the Renovation blog that we are converting our SRO into a 2-family residence, we were contacted off-list by a regular reader who's also a veteran owner and renovator of Brooklyn brownstones. He advised us strongly to convert to a 3-family instead, citing a higher market value ($50K to $75K higher), greater flexibility down the road, and the prohibitively high cost of trying to change the C of O again at a later date. When we were originally discussing the matter with our code consultant, we were persuaded that the additional costs and code requirements of a 3-family (sprinklers or fire escapes, handicap access) made it less desireable. What do you think? Have any of you faced a similar choice? Does a 3-family really command such a price premium?




Posted by Brownstoner at 3:12 PM | Comments (18)
Categories: General

Comments

I think it depends on your use. if you want to make your home a cash cow brownstone-go with the three family, have your fire escape, rental units, city code to think about etc. etc. Just remember that aesthetics are effected when you make that decision. Cutting out peep holes in my beatiful three panelled doors would be enough to dissuade me from that course of action.

Posted by: Anonymous at February 2, 2005 3:43 PM

Stay with 2-family. It sounds like you are going to be there awhile, and if it's not rental income your after, but a family home, then stay with the more spacious 2-family for yourself.

Posted by: Anonymous at February 2, 2005 3:48 PM

i didnt say 50 - 75 k more.. i said 75 - 100 k more.. even if decide to make it a legal 2 , i stronglly advise you install a fire escape . it should run you 9 - 12 k for a 5 story building like yours . god forbid there's a fire you have that means of escape

Posted by: electricgreek1 at February 2, 2005 4:19 PM

I'm very curious about this. I have a three-family. I was already converted as such. The only way could afford it is through the income it generates. That said, for re-sale purposes, I wonder if a converted two is better. Most who can really afford a proper brownstone is going to want more than two bedrooms.

Posted by: Anonymous at February 2, 2005 4:44 PM

At the high end of the market, I think a 2-family is more marketable and higher priced than a 3-family. I discussed this with realtors and they were unanimous that the best confirguation (aside from a single family) is a garden level rental unit with a triplex or quadraplex above that for the owner. That way, you maintain the family home feel of a brownstone. That is, you walk up your stoop and enter your home. There are no tenants walking around above you or in the hallways. If you make a 3-family, you will lose that special quality of having the internal stairway all to yourself. With the internal stairway, you get a much more spacious feeling in your home. And you will not be driven crazy by tenants walking in your hallway or walking in any apartments above you.

I decided to convert my 4-family to a 2-family for both my own comfort and for resale value. I at first thought about doing a 3-family, but I ended up deciding against that. I would rather give up some cash flow for the benefit of having a real home feel in my brownstone.

Posted by: Anonymous at February 2, 2005 4:57 PM

If you can afford, it Two family is the way to go. Keep the elegence of brownstone living and have some income. This assumes a garden rental with owner occupying all floors above.

Posted by: Anonymous at February 2, 2005 6:51 PM

Maybe it's different in Manhattan, but among the brokers community here, 2 family commands a better comp than 3 family. Single family houses tend to be more desireable by prospective buyers for the simple and straightforward fact that the demographic is one that's already shying away from multiple dwellings, so the idea of living with neighbors above and below them is somewhat moot.

Come to think of it, Brownstoner, you should run the numbers from your database to see how they shape up. That's probably the surest way of ascertaining the value question.

Posted by: Anonymous at February 2, 2005 8:18 PM

I agree with the general sentiment here - all brokers I have spoken to tell me that a 2-family commands a higher premium to a 3-family.

Regarding escaping your house if there is a fire - you should have a roof hatch that will allow you to walk over to a neighbor's roof to the extent you have a fire and can't go down the stairs. If you have one of those old wooden hatches at the top - I would suggest buying a new "hydraulic" hatch to make it easy for anyone to open (this was an unexpected cost in our renovation).

Posted by: Jeff at February 3, 2005 9:32 AM

I'd have to agree with the majority of the comments, which are saying that 2-family is the way to go. If you'll notice, income properties go for significantly lower price mulitples than 1 or 2 family properties. I believe this is because high-end brownstone buyers are paying up to get the space and quality of a single or 2-fam home. A 3-fam simply does not offer the space and layout that high-end buyers desire.

I converted my 4-story home from a single to a 2-fam with a garden-level rental. I choose this layout because it provides me with the feel of a large home and because it provides the greatest separation between me and my tenants. I really don't see how owners with tenants overhead do it. I've vowed never to live underneath anyone ever again - it drives me crazy to hear squeeky floors and elephants overhead. Also, my owner triplex provides 2 baths and 5 BR's. I simply do not need more space. But as a 3-fam, I would only have a duplex, which would have only been marginally more space than the 3BR co-op I sold. Why would I sell a co-op, pay wayyyy up to get a brownstone, which involves ten times the money and hassle, to barely increase my quality of housing?

As far as I can tell, its the single and 2-fam homes that are commanding top prices, not the 3-fam and above - and for very good reasons.

The last point is that in my 2-fam configuration, it would be extremely easy to convert back to a single family - we dream of someday not needing a tenant - and that apt will become my game room complete with pool table, dart board, home theatre, and wine cellar.... well... one can dream.


Posted by: BigBubba at February 3, 2005 10:21 AM

In your rennovation blog, could you post some of the steps you're taking to convert your C of O? I have a 4 story brownstone w/ a C of O for 2 that I'll be converting to 3. I understand it's a laborious process, and would love to hear how you're getting on.

Posted by: jk at February 3, 2005 10:22 AM

We are currently purchasing a 3-story brownstone that is configured with a rental on the top floor and the main kitchen on the ground floor. Before we move in, we are considering reconfiguring it either to (1) a single family, (2) to an upper duplex with a kitchen on the parlor floor, or (3) leaving it as is with the rental above and the duplex below to facilitate easy access to the garden for us (but still moving the kitchen to the parlor floor).

Can anyone comment on either the costs involved in any of these options and/or the impact on perceived value of the property.

Posted by: Anonymous at February 3, 2005 11:07 AM

"...currently purchasing a 3-story brownstone ...considering reconfiguring it either to ...an upper duplex with a kitchen on the parlor floor...Can anyone comment on either the costs involved in any of these options and/or the impact on perceived value of the property."

Sure thing. You really need to consider where your family would like to do most of it's hanging out. The parlor floor usually provides a better living space due to higher ceilings, better light, etc. We installed a kitchen in our rear parlor where none existed - so the plumbing costs are major. In addition, there's often not much free wall space to hang cabinets, so islands and pantries are frequetly used. I would budget up to $50,000 for the kitchen. If your kitchen is on the parlor floor, then you'd also want a door (to a deck) to the backyard. Decks can run $5,000 to $10,000. Converting a window to a door could be $2,000. If I were you, I' move the tenant to the garden level - which doesn't mean you have to give them garden access, though it helps market the rental. We used to provide the tenant with space under our deck, ut then noticed that it was rarely used. With our next tenant, we did not include any outdoor space, but were still able to get same rent - we're only a stone's throw from Prospect Park so I don't think it's a big deal to them.

One other thought, if you can afford it - an extension off the garden floor would provide a bigger and better rental, and you could put your deck over the extension. Just a thought. I'd budget up to $20,000 for an extension - just a guess, as I did not do that.

As far as the cost of renovating your garden level to accomodate a rental, I'd budget around $20,000 for a low-end kitchen, low-end bath, carpentry, etc.

Much depends on what else you need to do to the house - does it need all new electric service, plumbing, roofing, etc. I spent over $400,000 on renovation due to the reconfiguration I described, and the fact the house needed total systems upgrades, plus change of C-O to 2-fam.

Posted by: BigBubba at February 3, 2005 2:44 PM

Can anyone tell me if you'd have to change the C of O if it is currently a 4 family and it was changed to a 3 family? Right now the house is 4 story - 4 family. I would like to convert 2 units into a duplex keeping 2 rentals

Posted by: Anonymous at February 3, 2005 7:54 PM

"We are currently purchasing a 3-story brownstone that is configured with a rental on the top floor and the main kitchen on the ground floor. Before we move in, we are considering reconfiguring it either to (1) a single family, (2) to an upper duplex with a kitchen on the parlor floor, or (3) leaving it as is with the rental above and the duplex below to facilitate easy access to the garden for us (but still moving the kitchen to the parlor floor)."

I have the same situation. After living in my house for 9 years as a one family, we are finally going to do the big reno. In the begining I thought that I would want the kitchen on the parlor floor, but now that I've had the kitchen right off the garden for so long... I can't bring myself to do it. BTW, we use the top floor kitchen as a laundry room.
So when we finalize plans with our architect, the layout will be with the kitchen on the garden floor. We will move the laundry to the parlor floor (thereby providing plumbing on that floor for a kitchen should a future owner want it there)and continue to use the house as a one family.
If I were to use the house as a two family there would be no question. Garden floor rental with owner's duplex above with deck off the Parlor floor. You can't beat that configuration for resale.

Posted by: Anonymous at February 4, 2005 12:28 AM

"In the begining I thought that I would want the kitchen on the parlor floor, but now that I've had the kitchen right off the garden for so long... I can't bring myself to do it. "

I agree - if I had a 3-story one-family, I might put the kitchen on the garden level in back and keep a formal dining room (or maybe a family room) in front. But, I have a 4-story and there is no way I'm running up and down that many flights to get can of beer. So, if I were using my bldg as a 1-fam, I'd keep the kitchen on the parlor floor. Overall, I find that having the kitchen where the family does most of its hanging out it best. My bldg is wide enough that I can fit both the kitchen and a sizable dining table in the rear parlor. If it were a narrow bldg, I'd probably put the kitchen in an extension - you see this configuration a lot in the Park Slope townhouses along the park on 4th and 5th streets. Of course, the extension really cuts into the garden space.

Posted by: BigBubba at February 4, 2005 9:45 AM

The evidence actually points to the contrary. 2 families still have the record price in all brownstone neighborhoods - just ask your local appraiser. Although appraising 101 says you rate a 1 family higher, their lower frequency of market availability does not show this in reality. 3 families work better for a landlord - not for resale. The top dollar customers come to Brooklyn for more space and already have money - they are hesitant to have one tenant, nevermind 2.

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