Converting Single-Family to Multifamily: The Refi Math

Converting single family to multifamily changes the math on a house you’d otherwise flip. Bukola Majekodunmi bought a 3-bed/2-bath, added a bedroom, turned a run-down detached garage into a 1-bed/1-bath apartment, then refinanced at 70% LTV — pulling out $70,000 while keeping 30% equity and $2,200 a month in cash flow after CapEx and vacancy. Her flips netted $60,000 to $80,000. Same cash, except one version keeps paying.

That comparison is the whole argument for the conversion play, and it’s worth running on your own deals before you list the next rehab. This guide walks the sequence she uses: where the extra units actually come from, why she stabilizes before she refinances, how the rezoning and side-lot development piece works, and the operational cost of running the finished units as furnished mid-term rentals.

It also covers the capital discipline that comes with the strategy — including why she has stopped buying entirely while her current Houston project runs.

From the Real Estate Pros Show

This article draws on an interview with Bukola Majekodunmi of Tomic Properties on the Real Estate Pros Show, hosted by Issa Hanna.

The Deal That Made Flipping Look Expensive

One deal reset Bukola Majekodunmi’s entire strategy. She bought a three-bedroom, two-bath house and converted it to a four-bedroom, two-bath inside the existing footprint. The property also had a detached garage in rough shape. She left it alone at first, rented the main house to a long-term tenant for a year, and then converted the garage into a standalone one-bedroom, one-bath apartment.

Then she refinanced. The numbers:

• Cash out: $70,000 at a 70% LTV refinance
• Equity retained: 30%
• Net monthly cash flow: $2,200, after CapEx and vacancy reserves

Her flips had been netting roughly $60,000 to $80,000 each. So the cash-out on this one deal landed inside the range she was used to collecting on an exit — except she still owned the house, still held equity, and had $2,200 a month coming in behind it.

That is the entire case for the conversion play in one comparison. A flip converts the house into a single payment and ends. A conversion converts the house into a larger unit count, borrows against the new value tax-deferred, and keeps the income stream. The capital recycles either way; only one version leaves an asset behind.

“I was shocked,” she said of the refinance. “I was like, what am I doing? Why am I flipping properties?” Every property she buys now gets evaluated as a unit-count problem rather than an ARV problem.

Where the Extra Units Come From

The extra doors come from space the seller never counted. Three sources show up repeatedly in Majekodunmi’s portfolio:

1. Bedrooms inside the existing footprint. The 3/2 became a 4/2 without expanding the structure — reconfiguring walls to produce another rentable bedroom.
2. Detached garage conversion. The run-down garage became a self-contained one-bedroom, one-bath unit with its own kitchen and bath. That single move is what turned the house from a single-family into a duplex on the appraiser’s worksheet.
3. Splitting the house itself. Her current project takes a three-bedroom, one-bath single-family and converts it into a triplex.

None of this works on a lightly worn house you plan to paint and carpet. She buys very distressed properties specifically because the renovation is going to be a gut anyway — “I buy a very distressed property and I’m taking all the walls, everything out.” If you’re removing walls regardless, redrawing the floor plan around two or three separate units costs incremental money, not a second budget.

Two cautions. First, this is her approach in her market, not a universal permission — what you can add and whether a second kitchen is legal depends entirely on your local zoning and building code. Second, the design work is in-house for her. She draws her own plans, designs the renovation, and acts as contractor on her own projects. If you’re outsourcing all three, your conversion cost per added unit will look different from hers.

Normally I make about $60,000, $80,000 on my flips. On this deal, I was able to cash out $70,000 at a 70% refinance. So I had 30% equity and I was cash flowing $2,200 after CapEx, after vacancy, every single month. And I was like — what am I doing? Why am I flipping properties?

— Bukola Majekodunmi, Tomic Properties

Sequencing the Conversion So You Don’t Stall

The order matters more than the speed. On the duplex deal, Majekodunmi finished the main-house renovation first, placed a long-term tenant for a full year, and left the garage untouched — even though converting it was always the plan. Only after the garage apartment was complete did she refinance.

The logic is straightforward. A lender and an appraiser value what exists and what’s producing, not what you intend to build. Refinancing after the first renovation would have valued a four-bedroom single-family. Refinancing after the garage unit was finished and the main house had a year of rental history valued a two-unit property with demonstrated income. Same house, different number.

The practical sequence:

1. Acquire distressed, renovate the primary structure
2. Place a tenant and build rent history
3. Complete the second unit, permits and inspections included
4. Refinance against the stabilized, higher unit count

On pace: her crew runs a full gut — walls out — from start to finish in about four months, including permitting and inspection time. That number holds because she doesn’t rebuild a team per project. The same subcontractors move from property to property and already know her finish standards, which she describes as nearly five-star hotel level without the five-star budget. She self-rates her operational process a 9.5 out of 10, and the continuity of crew is the reason.

If you’re bidding out every trade on every conversion, build more than four months into your hard money hold period and price the carrying cost accordingly.

Rezoning and Building on the Side Lot

Her current Houston project is the conversion strategy taken one step further: she bought the property specifically for the adjacent land. The house itself — a three-bedroom, one-bath — is nearly finished as a triplex. The land is where the rest of the value sits.

She converted that parcel to a multifamily plat and is now running architectural permits and engineering for a ground-up build: a duplex in front plus a single-family. Three existing units from the conversion, three new units from the dirt, on a parcel the seller priced as one house.

The capital discipline that came with it is the part most investors underestimate. She already carries an existing loan on the property, and she may have to self-fund the entire development. So she stopped buying. Not slowed — stopped.

I’m not buying anything right now, because I’m reserving my funds… I don’t want to be cash-strapped at any point in time until the project is done.

Asked to rate her financial readiness to take down a new deal tomorrow, she said 2 out of 10 — and described sitting still as uncomfortable. That’s an honest read on what ground-up development does to your acquisition pipeline. Permitting and engineering timelines are outside your control, draw schedules on self-funded work are entirely your problem, and a second deal competing for the same reserves is how a development project turns into a distressed sale.

If you’re adding entitlement and vertical construction to a conversion, assume your buy box closes until the certificate of occupancy clears.

Why the Units Get Furnished Instead of Leased Long-Term

Majekodunmi doesn’t do long-term rentals anymore. Every unit in her portfolio is furnished and run as a mid-term rental aimed at traveling professionals, with short-term bookings filling the gaps between mid-term tenants. Two of her properties run as short-term rentals outright.

Furnished mid-term is a natural fit for converted units. A garage apartment or a triplex unit is small by design; furnished nightly and monthly rates don’t penalize square footage the way a long-term lease does, and traveling professionals on 30-to-90-day contracts aren’t shopping on price per square foot.

The honest cost is operational, and she’s blunt about it. She has cleaners who know the drill, but she still coordinates them herself. On vacation, she texts the 10 a.m. check-out instructions. She watches the cleaning videos her crew sends and replies with what she noticed. Asked what she’d come back to after 30 days with no phone, her answer was that there would be no business to come back to — because she doesn’t yet have a second set of eyes she trusts to hold the standard consistently.

That’s the trade. Furnished mid-term produces more revenue per unit than a long-term lease on the same door, and it demands a coordinator who is never fully off. She uses AI for tenant communication and has processes in place for the short-term side, but the quality control is still her. Budget for either a manager you actually trust or your own ongoing time before you furnish anything.

Choosing the Strategy Before You Choose the Property

Majekodunmi’s core argument: investors start from the property when they should start from themselves. Her point is that the same people who are exacting about their own home — bedroom count, home office, a guest room for mom — become indifferent the moment it’s an investment, and reduce the entire decision to ARV, purchase price, and whether it clears 70%.

“The investment needs to start with us and work for us,” she said, “because the other way around, you’re trying to fix that property into your lifestyle.”

The questions she says come before you evaluate a single address:

• What are your goals, and where do you want to be in five years?
• How much capital do you actually have?
• What reserves do you hold for the unexpected — because it will happen?
• Can your holding costs carry you through the full renovation if you’re on a hard money loan?
• How much time do you have? Can you manage the property, or do you need a manager?
• What risk can you tolerate?

Her answers to those questions are what produced the conversion strategy. She didn’t find a duplex conversion and then build a business around it; she set a five-year goal, realized flipping had no destination attached to it, and picked the strategy that matched.

Her second piece of advice is to then stay there. Pick one strategy and run it long enough to become known for it, rather than rotating through co-living, assisted living, and short-term rentals as each one trends. She calls the whole framework clarity before commitment.

Frequently asked questions

How much can you cash out when you refinance a converted duplex?

On Majekodunmi’s single-family-to-duplex conversion, a 70% LTV refinance returned $70,000 in cash while leaving 30% equity in the property. The amount you pull depends on the appraised value after conversion, your lender’s LTV limit, and how much of your own capital went into the purchase and renovation.

The key variable is the appraisal, which is why the added unit needs to be complete and the property stabilized before the lender orders it. Loan terms vary by lender and borrower profile — confirm your LTV ceiling before you budget the renovation.

Do you need to rezone a property to convert a single-family house into multiple units?

Not always for the interior conversion, but often for new construction on the same parcel. Majekodunmi added a bedroom and converted a detached garage into a separate one-bed/one-bath unit without describing a rezoning on that deal. On her Houston project, she did convert the adjacent land to a multifamily plat specifically so she could build a duplex and a single-family on it.

Whether an accessory unit, a second kitchen, or a triplex split is permitted is entirely a function of local zoning and building code. Verify with your municipality before you contract on a property for its unit-count potential.

How long does a full gut conversion take including permits and inspections?

Majekodunmi completes a full gut — walls removed, floor plan redrawn — in about four months from start to finish, including permitting and all inspections. That timeline depends on a dedicated crew she moves from project to project who already know her specifications, which eliminates the bidding and ramp-up time most investors absorb on every deal.

If you’re assembling trades per project or working in a slower permitting jurisdiction, build in more time and price the additional hard money holding cost into your deal.

Is converting to multifamily better than flipping the same house?

On the deal Majekodunmi ran both ways in her head, the conversion matched her flip profit and then kept paying. Her flips netted $60,000 to $80,000; the conversion returned $70,000 in refinance proceeds plus $2,200 per month in net cash flow and 30% retained equity.

The tradeoff is time and complexity. A flip ends in months with a clean exit. A conversion requires a tenant, a stabilization period, a second renovation phase, and permanent management — and it ties up the property instead of returning all of your capital at once.

What reserves should you have before starting a conversion project?

Majekodunmi doesn’t name a dollar figure, but she frames reserves as two separate pools: money for the unexpected, which she says will happen, and enough to carry holding costs on a hard money loan through the entire renovation period.

Her own behavior shows how seriously she treats it. Facing a development where she may have to self-fund the build on top of an existing loan, she stopped acquiring entirely and rated her readiness for a new deal a 2 out of 10 rather than risk being cash-strapped mid-project.

The bottom line

Run the comparison on your next deal before you commit to an exit: price the flip, then price the same house with one more unit in it — refinance proceeds at your lender’s LTV, plus monthly cash flow net of CapEx and vacancy. If the two numbers are close, the conversion wins on everything that happens after closing. Just confirm what your zoning actually allows, and confirm your reserves can carry the longer timeline, before you buy for unit count.