Reader Case Study - Purchase a duplex to convert into primary residence?

[espyfamoffour]

I'm considering purchasing an older duplex (built in 1915) in des moines to turn it into my primary single family residence.  When completed, it would be an upgrade in space/location/yard/living/hosting/etc.  Real estate is booming, and I'm looking at this as an opportunity to potentially buy low and do the work needed to convert (hire work done where necessary) Defintely looking for insight on conversion process/permits/etc.  The conversion would be an ongoing project while we live in our existing home, which we would then sell when we're ready to move in.  Not afraid of hard work but do want to accurately estimate risk/reward, have an appointment to go and see it this afternoon.

Details:
Previous owners are now deceased. Previous conversion work was thought to be in 1960's, but no permit info on assessor site, so who knows what was done up to code.  Definite additions on to original building.  Assessor site is showing it as a conversion so something was documented at some point.

Keller Williams listing:

http://sa.kw.com/WAP/StandalonePropertyDetails.action?applicationId=2&sourceId=258&propertyId=2092249758&viewType=IMAGES
zillow listing: https://www.zillow.com/homedetails/4317-Harwood-Dr-Des-Moines-IA-50312/794109_zpid/

The property is in a desirable neighborhood/location and is in 'above normal' condition according to the assessor site.   
http://www.assess.co.polk.ia.us/cgi-bin/map/mapviewer2.cgi/pid=09002302000000&scale=1/2000&size=320x240&GetCard&?107,121
Newer garage in 2001.
2 bdr/1 bath up,
1 bdr 1 bath downstairs.
Separate kitchen/laundry in both units
No connection of units within the home
Central Air on 1st floor
Radiant heat/window ac unit on 2nd floor
Previous owner lived in bottom unit and rent out top unit for $750 + electric.

The list price is comparable to what move in ready single family homes in the neighborhood have gone for recently, but this is NOT a single family home and isn't 'move in ready' *see photos, pink walls, blue shag carpet, etc.

At what purchase price is this a good deal assuming I want to

• Converting to single family residence (permits)
• Remove upstairs kitchen
• Redesign downstairs kitchen
• Demolish any barrier walls, etc

I'm capable of pricing out a bathroom remodel/flooring install/etc.  It's the permit/kitchens/load bearing structures/etc. that I don't have experience with.  Stay away?  Worth a look? Help![/list]

Update: 
Thanks for comments/feedback. In response to the facepunch, the house is 2.3k sq. ft with another 1k in an unfinished basement, the listing on zillow is incorrect.  But there's definitely an argument that we don't need to be living in anymore than the 1,400 sq. ft we do now.  Getting into personal preference, etc.

In response to it going for less than listing price, the property is distressed in that there is a lot of cosmetic work that needs to be done to get it back to a level that would demand rents of $3,000 between the 2 units.  Not sure you could get it listed for that rent amount, actually.

If anyone does have experience converting a property and the work that goes into it any feedback would be greatly appreciated!

I went and saw the property yesterday, the RE agent shared that an architect associated to previous interested buyer estimated 125k costs to convert back to Single Family residence. 

[Optimiser]

I'm looking at this as an opportunity to potentially buy low and do the work needed to convert
...
The list price is comparable to what move in ready single family homes in the neighborhood have gone for recently, but this is NOT a single family home and isn't 'move in ready' *see photos, pink walls, blue shag carpet, etc.

Why do you think that it being a duplex means you can get it below list? Are duplexes hard to sell in your area? It seems like you would need to get a significant discount to make this worthwhile.

FWIW, I live in an area with a much different real estate market, but have been outbid on 3 multi-family properties in the last year and I was offering over list price.

[Cwadda]

I agree with Optimiser. I'm not sure you can go into this thinking you're going to get a steep discount. It's already on the market. I'd be more inclined to think you could if it was off market and you were in the right time, right place.

If it's already around the price of single family homes, wouldn't you end up losing money on the deal by sinking money into the conversion? IMO, it'd make more sense to just buy it and rent it as a 2 family (if you can get $3000/month in gross rents).

[tralfamadorian]

If it's already around the price of single family homes, wouldn't you end up losing money on the deal by sinking money into the conversion? IMO, it'd make more sense to just buy it and rent it as a 2 family (if you can get $3000/month in gross rents).

+1 

Also facepunch coming- why do you need a 3.3k sqft house?

[Another Reader]

This makes no sense.  An unremodeled structure that is a permitted duplex sells for as much as a similar renovated single family in the same neighborhood?  That says there is a premium for duplexes in your market and you would be grossly overpaying to buy a duplex and convert it back to single family use.

[calimom]

This looks like a good deal and an interesting property - but only if you were to fix it up, live in one unit and rent out the other. Converting it to a SFR does not make sense.

[espyfamoffour]

Why do you think that it being a duplex means you can get it below list? Are duplexes hard to sell in your area? It seems like you would need to get a significant discount to make this worthwhile.

FWIW, I live in an area with a much different real estate market, but have been outbid on 3 multi-family properties in the last year and I was offering over list price.

I don't know that duplexes are harder to sell than a single family residence.  I do know that this the history is the owner who was living in it was deceased, and the price has dropped from a FSBO listing in may @ 350,000 rather quickly to $300,000 in August with a listing agent

[espyfamoffour]

This makes no sense.  An unremodeled structure that is a permitted duplex sells for as much as a similar renovated single family in the same neighborhood?  That says there is a premium for duplexes in your market and you would be grossly overpaying to buy a duplex and convert it back to single family use.

No.  The current structure that is a permitted duplex is listed at 300,000 with actual sales price unknown at this moment.  If this were a renovated single family, I could show you sales data in the neighborhood showing houses selling for over $170/sq. ft., putting the value for this place up to 400k depending on work done in conversion (2,351 sq. ft x $170 = $399,670)...

Thought was purchase it for as low as possible, convert and have a single family residence worth 400k+ depending on work done during conversion... Hopefully that makes sense.

[Cwadda]

Why do you think that it being a duplex means you can get it below list? Are duplexes hard to sell in your area? It seems like you would need to get a significant discount to make this worthwhile.

FWIW, I live in an area with a much different real estate market, but have been outbid on 3 multi-family properties in the last year and I was offering over list price.

I don't know that duplexes are harder to sell than a single family residence.  I do know that this the history is the owner who was living in it was deceased, and the price has dropped from a FSBO listing in may @ 350,000 rather quickly to $300,000 in August with a listing agent

This is something you will definitely want to know before even considering a conversion project. Hypothetically, what if a duplex is worth way more after being fixed up than a single family?

In my market multi families are snatched up by investors well before the SFRs.