Pregnant with her third child and living in a two-bedroom apartment in Brooklyn, public relations executive Morgan Painvin started searching for a bigger place last year. With few three-bedroom options available, her real-estate agent started to show her something different: entire apartment buildings. In September, Ms. Painvin bought a three-unit townhouse in Brooklyn with plans to convert it into a 3,000-square-foot home. “We were kind of floored at the amount of space you could get,” she says. In search of more space, more homeowners are converting multiunit buildings into generously-sized single-family homes. With inventory tight in many cities—and sales prices that now surpass those seen in the previous boom cycle—some homeowners say buying and converting an apartment building, condo or multifamily townhome can be the best way to get the kind of space they want. Real-estate agents and appraisers say such projects can have a big upside when it comes to resale value. Jonathan Miller, a New York appraiser, says the average price-per-square-foot in Manhattan for a single-family home in 2015 was $2,137, compared with $1,584 a square foot for a two-family home, and $1,371 for a three- to five-family home.
The headaches of such conversions can be numerous. In cities where some housing is rent-regulated, buyers often focus on already vacant buildings, while others buy out tenants or wait for them to either die or move out on their own. Even if the building is vacant, permit-approval processes can delay construction for years. In San Francisco, housing laws make removing housing units from the market so difficult and controversial that conversions are rare. Nick Stern, head of a residential construction management and general contracting firm and son of architect Robert A.M. Stern, purchased a four-unit apartment building in New York’s West Village with three tenants who had two-year leases in place. He did about 1½ years of the work with the tenants there, then moved into the building’s owner’s unit with his wife, where they eventually had three children. He then spent 1½ years finishing the work while living there with his family. “I put the tenants through hell, and then I put my family through hell,” he says. The end result, though, is a roughly 6,000-square-foot, six-story townhome designed by Randy Correll at Robert A.M. Stern’s architecture firm, with input from the elder Mr. Stern. Apartment buildings have often suffered more wear and tear than single family homes, due to the effects of renters rotating in and out. Plus, you’re “talking about buildings that are in some cases nearly 200 years old, built at a time when the amenities were very different from what people expect today,” says Ben Bischoff, an architect with Brooklyn-based Made Architecture who has done five conversions in Greenwich Village in the last three years. Such projects typically require reimagining the layout entirely. To renovate Ms. Painvin’s place, a construction crew is removing three small kitchens and converting the main level into an open concept space with exposed ceiling beams. Ms. Painvin planned to move in before the arrival of her baby in April, but delays securing a permit pushed back their expected completion until the fall. She says the overall renovation budget is double what she originally anticipated, but declines to say what she’s spending. A three-bedroom single-family home in her neighborhood sold last year for $1.6 million. Such conversions have become common in some neighborhoods in Chicago that have attractive, older apartment buildings and good schools. Don Higgins, a Chicago-based architect, says he started getting a handful of requests for such conversions about 13 years ago. In the past two years, he says, demand has grown exponentially, particularly for properties in Chicago’s Lincoln Square and Northcenter neighborhoods. “There are whole blocks being torn down, and people are putting up single family homes,” he says. His clients Jeremy and Jenna Martin initially bought a circa-1921 two-story, three-unit building in Lincoln Square as an investment. When they couldn’t find a single-family home they liked in a good school district, they decided to convert their building. One of their leases was expiring, and they offered the other tenants several months of free rent in exchange for moving out. Their conversion involved ripping down nearly all the interior walls and reframing new ones, adding new plumbing, electric, bathrooms and building a new kitchen. Ms. Martin describes the 4,000-square-foot result as an “industrial loft” on the inside with a “classical Chicago look” on the outside, though the exterior still betrays the home’s multifamily past. “We’ve had people try to find our house and they say, ‘I’m here but it looks like a two-family building,’” says Mr. Martin. Mr. Martin, who works in property management, and Ms. Martin, who works in higher education, paid $245,000 for the building in 2009 and about $430,000 on the renovation, which was completed in 2014. The couple says that on their block alone there have been three or four conversion projects in the last couple of years. Developers are also getting in on the action. Greystone Development paid $10.45 million for an apartment building on a landmark street in New York’s West Village in 2012, according to public records. It then spent two years turning 10 apartments into a 7,000-square-foot, six-bedroom single-family home. Jeff Simpson, head of Greystone Development, says the property sold the same day it was staged for $21 million. In some cases, homeowners are returning previously subdivided homes to their original states. Jeremy Flug paid under $100,000 for a Victorian home in Granville, Ohio that had been built for a single family, but divided over the years into several small apartments and student rentals. E.J. Meade, his Boulder-based architect of Arch11, says the property was in such poor condition they couldn’t even salvage the hardwood floors. Mr. Flug, the founder of a baseball fantasy camp for children, says he loved the potential and the location of the home, across the street from his alma mater, Denison University, and adjacent to a wooded area. His architect designed a new layout that included just one large bedroom on the upper level, 2½ bathrooms and lots of entertaining space on the main level. During construction they found a hidden lower-level room, which they turned into a wine cellar. The project, completed last summer, cost under $1 million. Anna Wilcoxson recently decided to convert her childhood home in the Mission Hills neighborhood of San Diego. Built as a single-family residence in 1912, the home had been converted into apartments after World War II. Though her family has owned the home since the 1950s, and didn’t share the house with another family, her architect, Kim Grant, says the home still had some elements of a multifamily dwelling. An upstairs kitchen still had a hole in the ceiling from the stove, and kitchen cabinets had been used as storage. Ms. Grant says she spent about $600,000 on the renovation, which included restoring the exterior to the original look. They also opened up a balcony that had been turned into a small room with stucco walls Ms. Wilcoxon’s mother called “the chapel,” added to make the upstairs apartment larger. The project was completed last summer. “It’s just the way the house should have been and I’m sure whoever built it would be thrilled with the way it looks now,” says Ms. Wilcoxson. This article originally appeared on The Wall Street Journal.