Strange Zoning Issue, Waco TX

3 Replies

Greetings BP,

I have submitted an offer on a somewhat strange property. It is 2 SFRs and a garage apartment all on one lot. Fully leased with gross rents at $2000. As such, the seller is asking what would seem to be well below market value at $140k. After speaking with several lenders and professional surveyors I have discovered that these properties often sell for much less because:

1. Lenders are very hesitant to lend on properties for which no comps can be found, even if the property performs well. AND if you close on the property with cash, then replat (and/or divide the single lot into 2 lots), banks STILL often won't lend because the properties have 1 lien with what is now 2 lots.

2. Rezoning can be time consuming, expensive and sometimes impossible.

The interesting thing that my lender explained is that if I were to negotiate a much longer escrow with the seller, to allow time to replat BEFORE closing, then not only would I likely be able to refi as 2 separate lots, but it would also add significant value to the property.

This is all very new to me. Does anyone have experience replatting a strange property?

Hi @Benjamin Bennett , I did this in my market and it worked out well using a construction loan to purchase the property.   The re-platting process was tedious, slow, and filled with seemingly meaningless bureaucratic redundancies, but BECAUSE the land contained the basic necessities for frontage width and resulting lot size it was a fairly straightforward affair.

IF you didn't have those two boxes checked for your particular area, you'd be looking at a much, much more tedious affair. 

@Benjamin Bennett

I think I know which property you are talking about. It has been on MLS for months walking the price down. I wondered what was wrong with it.

I had a somewhat similar situation. I purchased a primary residence with 58 acres of land. Fortunately it was already platted as four separate parcels. When it came time to refinance the bank would not loan on it. The appraisals were all too low mainly because of a lack of comps. It was upside down with value with an older 1600sqrft house sitting on a bunch of land. I had to search around but I found a lender willing to loan on just the house and the parcel of land it sat on. Now with a single family home on 3.3acres had plenty of value, in fact more than with the all the land. We did the refinance. The result was I had a loan on my primary residence with 54 acres owned free and clear. It always pays to package the deal to what banks are used to seeing.

The other route you could go is to try for commercial financing. Get a multifamily family loan on a “tri-plex”. Commercial loans will consider rental income when underwriting a loan.

Good luck.

Thanks for the input guys. I really appreciate it. I heard back from the city today, they are not able to replat it. 

The strange thing is that the way it is zoned currently is out of ordnance. If we were to replat it, it would still be out of ordnance but it would be an out-of-ordnance valuable property that investors could work with, as opposed to an out-of-ordnance property that has a very limited property value.