Buy Lot W/house, Subdivide, Build 2, Sell 3?
So, I've located a nice large house on a 0.75 acre lot in a historic area. The asking price is 425k. 90% of the lots in the area are only 0.25 acre, and there are some that were formerly 0.75 acre lots subdivided and sold as 3 0.25 acre lots.
Most houses in the neighborhood sell for about 300k, usually the ones on a 0.25 acre lot. I'm seriously debating buying, subdividing, building on the other 2 lots, and then selling all 3.
Does this sound like a good idea? I also know I probably won't be able to go conventional with this. How would I go about locating private funding? My credit is good and I've done a few rehabs before, but my debt to income ratio is way too high right now (I have 2 other rehabs running right now).
The first thing I'd recommend is verifying what the current zoning allows -- use, minimum lot size and related issues. Since you mention that the property is in an historic area, I'd also make sure that there aren't any preservation, conservation or similar use and subdivision restrictions on the property.
I think you landed a goldmine! I would definately sub-divide and build on remaining 2 lots, doing this will maximize your profit on the deal. If the property hasn't already been sub-divided, then i would purchase the home, and sub-divide the land as soon as possible. You can get a construction loan from a lender to build on the remaining lots with the expectation to sell after construction. (It's called a spec loan). most construction loans do not require you to make a payment during construction because they build in an interest reserve to make the interest payments for you during construction. If you set up your current properties into interest only loans you can lower your debt to income ratio dramitically, and increase your properties cash flow. worse comes to worse , you can always get a stated income, or no income loan. The interest rates are slightly higher but it takes alot of hassle out of qualifing for a loan. Don't let your debt to income ratios hold you back, go for it! There's always a way! Good Luck........ 8-)
It's zoned R-12, and the regulations for that say I can have only 1 single family detached dwelling unit per lot. The distance requirements between structures do physically allow for 3 lots.
It is in a historic area, but is not a historic lot or structure.
Well, most of my loans are already interest-only =) I have just under 1 mil in mortgage loans, and even if I go stated, they're not going to believe that a network engineer (my day job) makes 200k a year =). I just started doing rehabs in january, so its pretty hard to prove other income... But thanks for the info on the construction loans, I will definitely check that out. Now all I need is private funding for the purchase =)
Quote:and even if I go stated, they're not going to believe that a network engineer (my day job) makes 200k a year =).
I just went stated on a loan and I am a Reservations Agent for an airline. I make like 17k/year and my stated income came out at 96k/year. They took it no problem. Its not called the liars loan for nothing. Hahahahaha
Scott
I also really don't want a 2,600/month bank loan hanging over my head too while all this is going on. I could do it, but it would be rough.
So, its under contract now... I don't close until september 24th. It has been verified that I can subdivide... Now I just need to finance it. Anyone know a good place to find private investors?