I recently looked at a new property which is currently set up as a duplex. One side has 1 bedroom, 1 bathroom, living room, dining room, bonus room, kitchen, and laundry room. The other side has a walk-through bedroom, living room, kitchen, and 1 bathroom. The electric is separate, but gas and water are combined. Currently, the tenant in the larger unit pays the entire gas and water bill.

Some options I am pondering:

1. Leaving the property set up as it is, but including the gas and water in the rent. This would probably rent for about $1,100/month total and I would be paying about $200/month in utilities.

2. Split the utilities. This needs a new water meter, water heater, and heat system (probably 1 or 2 through the wall heat pumps). This would probably put the monthly rent at $1,000/month. The cost to split the utilities would be about $4-5k.

3. Make this a SFH. I think I could remodel it into a 4 bed, 2 bath. That should rent for $900/month. The remodel would probably cost about $3-4k.

I am leaning towards option 2, but I have not rented studio/1 bedroom units before and I'm wondering if a 4/2 SFH tenant would be better long term and give a better return with lower vacancy and collection rates.

Thanks in advance for any insights.

We love smaller spaces. A 4-2 is crying out for a larger group of people (read: more wear and tear.)

We sub-meter water for about $300. This does require that he go and reads the meter each month. Or at one duplex, we just split it 50/50 and no one complains. In fact, even at the units that sub-metered, it seems to run 50/50.

Never owned any multi-fans, but I've handled enough employee squabbles to know I like to keep my units separate. So, I have a bias towards single family. One area that I see an odd bit of a market for is generational homes. Very specialized, of course.

In the recently immigrated Hmong community, this is common. I've also had a lot of persons of any ethnicity looking for either two or three bedroom as they want to move a parent in with them, where aging parent is currently living on their own. Often, they mention they'd like three bedrooms so they could use an extra bedroom as secondary living room, so they could maintain some privacy.

In both of those situations, all you'd need to do was make one opening between the two units, and done. (Within building codes, state and municipality laws, of course.)

I'd been considering this at one point, as there is a large Hmong population in my community, as well as many baby boomers with an aging parent. (But, how to avoid all the families like the one I grew up in-a million bright, wild children, some in and out of jail, adult children returning home when they fell on hard times. Always drama. Yuck. )

I have people in the Main House and in the Garage Apartment of the same corner lot. There are three spaces off-street parking, including one covered space, and plenty of street parking as well. I always make it clear ahead of time that it's "First come first served." My tenants get along just fine on things like yard care and whatever... but man, they fight about who gets to park in the "good" spot! :) ("I've been here longer!" "I pay more!" etc, etc, etc.)

Kyle,

I really like separate utils. The FREEDOM!!! is amazing when they pay their own!

Vectren gas will install a second gas meter for free. You run the lines in the house.

Consider elec baseboard for the small unit. We converted our low end apts to elec baseboard because most of those folks cannot get gas due to unpaid bills, large deposits, and now, bad credit scores.

For water you can get a submeter on Amazon or do a cost split by number of occupants.

BRAD

I made my friend buy a Duplex instead of a home 30 some years ago. I cut open the wall between the two units so there was enough room for this new couple to grow and have lots of kids.

After the kids left, they moved into this property an elderly parent that now had their own kitchen and privacy.

When the parent died and also a spouse, they closed off the door between the 2 units and rented out the space for some extra cash -- enough to live on....