Can You Convert a Single-Family Property to a Multifamily Investment?

Posted Feb 13, 2024

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You can transform a single-family home into a multifamily investment through a conversion where you split the home into multiple rental units. However, there are things to consider before deciding to convert. 

Taking a large single-family home and converting it into two to four different rental units has the potential to provide additional income, which is attractive to many investors. There are several questions to ask yourself if you are deciding whether a conversion is right for your home. 

  1. What is the rental market?

Is there a market for rentals in your area? You wouldn’t want to spend money developing multiple units only to have vacancies and holding costs piling up. 

Your town's area also impacts the rental market. Is the neighborhood mostly large single-family residences? If so, it might not be the appropriate area for multifamily rentals. 

  1. What are the zoning and permit requirements? 

Every municipality has different zoning laws and permitting policies for multifamily dwellings. Some areas do not allow single-to-multifamily home conversions. However, if an area is trying to promote more rental units in the area, they might be happy to give the necessary permissions. 

  1. Are your building plans feasible? 

If you meet the zoning and permits and other conditions of your city, are the plans obtainable? Do you have a realistic construction budget? Do you have a plan to cover holding costs if the building plans don’t proceed as planned? 

You should also consider how you will find renters for the property. Do you have a marketing plan? Or will you hire a property management company to handle finding renters, getting leases, and managing the property? 

  1. Can conversion be done safely? 

Every city has different safety requirements for multifamily living units. You will need to check with your local municipality, but some requirements might include: 

  • Every residence needs a door leading to the outside of the home. 
  • Each unit needs its own sleeping area/bedroom, bathroom, and kitchen. 
  • Units might need their own utility meters. 
  • Fire codes will need to be met. 
  • The home's electrical grid will need to handle the increase in residents.

These are just a few of the safety requirements you might see. It is important to address them, or have a plan to upgrade the property. 

  1. What is the resale potential? 

If you sell, is there a market for multifamily properties in the area? If the area is heavily single-family homes, you might have trouble selling the property in the future. However, if the rental market is growing, you might find a buyer quickly. 

With so many factors impacting the decision to convert a single-family property into multiple rental units, it is wise to meet with a real estate professional or advisor who can help you evaluate the possibilities.

Pros and Cons

There are both benefits and drawbacks to your finances and the community you live in when converting a single-family home into a multifamily investment. 

Some benefits include: 

  • Might improve accessibility to affordable housing if it is lacking in your city. 
  • You might get more income tax deductions for owning an investment property. 
  • Because you will have multiple renters, you will still earn rental income if the renter in one unit moves out. 
  • Rental income from multiple units can potentially increase monthly cash flow. 

Some drawbacks include: 

  • There could be higher property taxes once the property is converted. 
  • If the rental market slows, vacancies are possible. 
  • With more tenants there could be more maintenance and repair costs involved in owning the property. 

With so many conversion possibilities, it is definitely something to look at as a real estate investor. The key is due diligence and making sure the choice is right for you personally, financially, and for the market.


This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.

All investments have an inherent level of risk. The value of your investment will fluctuate with the value of the underlying investments. You could receive back less than you initially invested and there is no guarantee that you will receive any income.

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