Scoping a Two-family Conversion

Planning a construction project is hard due to all sorts of unknowns, and planning an existing construction renovation project is even harder due to even more unknowns. What does the wiring look like behind the walls? Where is the plumbing under the floor? And so on. Your "Authority Having Jurisdiction" (AHJ) over your property, such as a city or county, also adds complexity and bureaucracy. If you're pursuing a single- to multi-family conversion and you get this process right, you have the opportunity to create an incredible investment from both a cashflow and equity perspective. If you get it wrong, you will go further into debt and wreck your savings and financial goals for years.

The best approach to learn design and engineering options and establish your project scope is to get three proposals from each subcontractor or vendor—while seemingly simple, you have to use site visits, ask very pointed questions, Do Your Own Research (DYOR), and pull it all together at the end.

Always walk the site with each contractor you're considering working with to get a proposal. If you talk with three HVAC technicians in this way, you will learn completely new and valuable information from each one, sometimes contradicting each other. You will get completely different quotes, in terms of the price but also how they price their work. DYOR on what they've shared with you to validate the information and to reconcile the conflicting information. Convert all of their often-PDF-proposals into a spreadsheet format, and normalize all their different approaches to quoting work to allow a more apples-to-apples comparison. You'll learn a lot from architects—but always remember that they are architects and don't actually know construction or engineering. In my experience, they often don't even know the building and zoning codes you are meant to pay them to ensure compliance with. As you learn from the architects (which add ~10–15% of project cost) and general contractors, or GCs (which add ~20–30% markup to all work), you'll start to see different routes you can go to perform your conversion, or the scope of the project.

Ask very specific questions and involve the contractor in your end-goal. Don't just say, "We want to make this a 2-family." Say, for example, "Our goal is to make this a 2-family property where the top unit is very nice and the bottom just nice enough; we can sacrifice on fixtures but not on energy efficiency." A good contractor—and salesperson—will educate and advise you on what options exist with your property, for their specialization, to help you meet your goal. Also ask what dependencies they have with the other contractors involved in the project—if an electrician, ask them how they work with the plumber and HVAC tradesmen; if a drywaller, ask them how they prefer to open up/take down walls, patch/put up new walls, as the project goes along. (For this last example, consider that your electrician can't put in the new outlets until the new wall is up—how will your drywaller ensure they have someone come out in a reasonable time to do that and not hold up the electrician?) This question about working with the other trades is important for two reasons—you learn, for yourself, how to coordinate the different trades. You also learn their attitude to working as a "team," and you can use any red flags to disqualify contractors who would disrupt the project because they can't play nicely with others. Finally, dig, dig, dig, with each contractor you work with during the site visit. If they say they can move the pipe from this part of the ceiling to the other, ask why and why not some other part? You'll never learn a trade this way, but you will learn enough to make better decisions about your project scope and down the road, to project manage and coordinate with the team working on your project.

DYOR on codes. If you talk to 5 architects, you will learn 7 different ways the building code can be applied to the placement of a bathroom in a room with a sloped ceiling (for example). Go find your AHJ's code, hopefully online in 2020, and start digging in. If someone says you can't do something and you're pretty sure you can, call up your AHJ and ask them directly. Then, find a resource (hopefully online) of the prior year's approved permits for the exact project scope you're trying to do. Get in touch with the owners or people involved in those permit approvals, and ask them directly on what the AHJ allows. Regarding building codes generally, you'll likely find that your AHJ adopted and only slightly amended the International Code Council's information. My recommendation (though of course not legal advice) is to start with the International Residential Code and the International Existing Building Code. While your AHJ may interpret things differently, a renovation to an existing, single-family building to a 2-family building should stay within those two sets of codes. But don't take my word for it—DYOR!

Having had two dozen site visits with contractors, analyzed and compared nearly as many proposals, and done your own research on the primary codes you'll need to comply with, pull it all together to determine your scope. This route of getting an estimate from each contractor for specific work is actually one of the most accurate estimates at this stage of the project, according to George Washington University professor Timothy Blackburn and also to an extent to common sense. Especially if you average all the estimates received, which should be easy if they are in a spreadsheet (and maybe throwing out the estimates you know the salesperson—sorry, contractor—inflated to get more money out of you), you can pull all of those pieces together to get a sensible estimate that is probably within +/- 15% of the actual number. You can also use rules of thumb and past projects to help validate this estimate—one rule of thumb is that Mechanical, Engineering, Piping (MEP) should equal 30%+ of your project cost, and as you're working with architects/contractors, ask them what they've seen similar projects to cost in the past. Bear in mind, on that last point, that both are incentivized to have you pay for a more expensive project.

With your scope laid out and estimated, you should have all you need to make the decision on if, and how, to move forward with the project. This will be a gut-wrenching process—you will think you have a clear, reasonably priced, relatively safe path forward, and you will get new information that makes you think it will be a complete disaster. Don't worry—get another contractor out, ask very pointed questions, DYOR, and pull it all together. Chances are you won't be able to do exactly what you thought you would be able to starting out, but you'll come close enough to realizing the financial end-result from your single- to multi-family conversion project that you had in mind. As they say in the gaming community, Good Luck Have Fun!