Converting A Multi-Plex Back To Single Family

MLS captions lead us to believe that this is something we should be doing, but I’m going to tell you that it makes absolutely no sense.

Unless, of course, you don’t care about your return on investment, or have money coming out your ears…

If I’ve seen it once, I’ve seen it a dozen times:

“……live in and collect income, or convert back to single-family!”

Captions like this appear on MLS all the time for 3-unit properties, and I always think the same thing: those two ideas contradict each other.

I believe, for the most part, that properties are purpose-built, and that this rarely changes.

A turnkey triplex should not be converted back to a single-family residence, for a multitude of different reasons, which we’ll explore.

But every day, there are a good 4-5 listings I come across where the MLS caption suggests, “Great 4-unit investment property!  Possible to renovate into gorgeous single-family dwelling!”  No matter the area, price point, or time of year, these listings are in abundance, and it makes no sense to me.

Why?

Well it should be obvious.  The cost.

If you could take a five-dollar bill, spend eight bucks, and magically turn that five-dollar bill into a ten-dollar bill, would you do it?

Not if you care about the cost, that’s for sure!

We often talk about “undoing existing work” in houses, as if to say that it makes no sense to buy a B- house and gut it, since you’re paying for somebody else’s so-so renovations and taking them out.  Only a D- house should be gutted, since you’re not wasting any money.

The same goes for taking apart a turnkey triplex and converting it back to a single-family dwelling.

Somebody paid a whole lot of money to create that triplex, and it’s almost certain that the money you spend to undo the 3-units and turn them back to one will not result in a positive return on investment.

Undoing a 3-unit property isn’t quick, isn’t easy, and certainly isn’t cheap.

Try and picture the front entrance to the house: perhaps there’s a small foyer, and then three doors to the three units, with staircases and walls built specifically for that purpose.  All that would be torn out, and remodeled.

Then consider that the main floor of the house, which is probably 2-beds, a bath, a kitchen, and a living room, would all be gutted and turned into a large, open concept living/dining/kitchen.

The second floor of the house has a kitchen where a bedroom would go.  Think about the plumbing, wiring, electrical in addition to the actual structural changes.

And the unit in the basement?  Once again, rip it all out.  Take out the kitchen, the walls that create separation between a bedroom, bathroom, living room, and kitchen, and re-work the layout to provide for a large family room or man cave; whatever a single-family home would necessitate.

This work isn’t cheap, and it really isn’t necessary.

I can’t figure out why anybody would want to “turn back the clock” on a triplex and convert it back to a single-family dwelling, and yet every day, practically every 3 or 4-unit property on MLS has some sort of reference to “convert back to single family” as if it were as easy as flicking a switch.

There are exceptions to the rule, of course.

Think of a century-old mansion, unique in every possible way, that had been owned by 20 different people in 110 years, used in dozens of different ways, and somewhere along the line, it was turned into a 12-unit rooming house.  If this property was one-of-a-kind, in a fabulous location, and presented an exceptionally rare opportunity, perhaps it would be worth gutting and turning back into a single-family dwelling.

But I have to think that somebody willing to undertake that kind of work and that cost would be thinking long, long term.

There are a slew of buyers today who think nothing of buying a $1,200,000 house, putting in $800,000, and being okay with the fact that the house might only be worth $1,800,000.  These buyers put a massive premium on being able to custom-build a dream home from scratch and choosing every conceivable feature of the property, and they think long-term.  They think about the house being worth $4,000,000 in twenty years when they go to sell.  They don’t really care about market value today when they’re finished building the house, since they’re not speculators, and not looking to flip the house.

But that’s an entirely different proposition from buying a 3-unit house and converting it back to single-family.  In the latter case, you’re not really building a dream home from scratch, but rather undoing work that’s been done on the property, at a cost that you have to bare.

It’s trying to fit a square peg into a round hole.

A friend of mine works in construction and has been working on a house on Balmoral for the better part of four years.  Yes, FOUR years.  How long does it take to build a house?  Well this isn’t justanyhouse…

Somebody purchased two semi-detached houses, and decided to turn them into one.

And this one house was going to be the buyer’s “place to die,” as he so eloquently put it, and he designed it to have every conceivable feature that he would need for the rest of his life, completely irrespective of cost.

The permits, plans, and permission took a good while, but what do you expect when you’re converting two semi-detached houses into one, and having two below-grade levels, and a 5-storey elevator, and basically everything but a rocket-ship inside.

The house, which will probably cost $8 Million to build, may only be worth $4 Million.

Does that make any sense?

Not to you or I, of course.  But to that house-owner, it made all the sense in the world, and was worth every penny.  Perhaps he has more money than he knows what to do with, or maybe he just isn’t as concerned with a return on investment as the rest of us would be.

But his situation is unique, and it’s somewhat unusual.

And only in a unique and unusual situation does it make sense to over-spend on a property, and change the use of that property into something entirely different.

As I said – there could be some mythical, 200-year-old house on a hill, previously owned by Sir John A Macdonald, that is currently used as a 13-unit social housing complex but would make for a one-of-a-kind family mansion, but more often than not, it doesn’t make financial sense to change the purpose of a house.

I know that there are a LOT of illegal triplexes in Toronto, or some borderline-triplexes that are really just a owner’s suite with a kitchen on the second floor, a hot-plate plugged into the wall in the basement, and no real privacy between the three “units.”  But any time you have to undo work that the previous owner has spent money on (even if it’s really poor workmanship, or cheap or unattractive finishes), you’re wasting money.

And unless you’re the guy that wants to spend $8 Million on a $4 Million house, you’d be best suited to buy a single-family dwelling to use as your single-family dwelling.

Oh, and just to further prove the point: those 3-unit houses on MLS, which sellers and listing agents call “triplexes,” don’t sell very quickly at all…

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  1. Frances says:

    It bothers me that the building used as an illustration was obviously built as a multi-unit building which, surely, no one in his right mind would try to turn into a single-family house. Is it even in Toronto – it doesn’t look like Toronto style? I would think that the houses advertised as convertible started out as single-family houses, were turned into duplexes or triplexes because no one wanted them as singles but are now desirable again.

    1. phil says:

      Yes, it can be in toronto, there is a few like that in little italy, nice buildings.

      I am guessing the picture is just to give an idea of how dont take things too literaly,

      1. phil says:

        I am guessing the picture is just to give an idea of how certain things built or converted for a purpose are not the best candidates for what you want to do.

        I think its clear.

        Phil

        1. ScottyP says:

          It shouldn’t bother you, Frances. If DF had put a standard photo of a standard multi-unit conversion with a standard 2-3 units in a standard single-family house, it would’ve served only to confuse.

          Put another way, it’s just a photo.

  2. phil says:

    Totally, If there is a choice, sure, better to buy a single home, but if we talk about little italy area, you have to deal with whatever comes in the market.

    A multi unit has a different purpose, to give profit at the end of the month, they may look a mess, ugly, naturally they wont sell for silly prices, different pool of buyers. These Buyers will buy more with their heads than with their hearts.

    Even if they don’t sell well, they are still too expensive to give a proper roi.

    In the end though i would buy a triplex to convert into single family if the price is right, and the structure allows for changes in the layout.

    Single family houses also require a lot of changes, how many times do we have to remove walls from century old houses to create a modern layout? Add an extra bathroom. We have to work with what we have on the market.

    Phil

    1. @ phil

      Good point about Little Italy. So many houses in that area have “in law suites” with a giant kitchen in the basement, ready to serve a dozen people. Everybody wants a turnkey, modern, well-designed house on College or Clinton, but more than half of the houses that come out onto MLS probably need a $150K reno.

  3. Rene Brassard says:

    “…at a cost that you have to bare…”

    It’s “bear”, as in “the right to bear arms”…

    Please pay attention to detail.

    1. phil says:

      David, Please don’t focus too much on details , please focus on the big picture.

      Perfect is the enemy of the good, of creation.
      Focus on results instead of perfection.

      Phil

    2. ScottyP says:

      Hey Rene!

      Are you also the realtor of the same name based in Abbotsford, BC? If so, your listings are filled with mistakes. And those are listings made on behalf of your clients, as opposed to a 2,000-word blog written on a daily basis for your enjoyment.

      If you’re not the same Rene Brassard, apologies to the gentleman from BC in what would amount to an unfortunate coincidence, being that he’s also in the same line of work as DF. Too bad he’s having his name muddied by such a petty bellyacher as yourself.

  4. Daniel says:

    Zero comments? Is it still the weekend? Or do people only care about hot topics and gossipy blog posts?

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