House and 3 acres - what to do with it?

Question

We have a property that is just a mile off I-40 just south of Raleigh that we can't decide what to do with. It's beautifully landscaped, has 2 mature pecan trees, blueberry and blackberry bushes, a small orchard and multiple grapevines. It's a stunning property with tons of privacy, has a pool, hot tub, completely fenced with 4 board fencing and multiple wired outbuildings. House was completely updated in a very tasteful manor, marble countertops, marble shower, etc... we surveyed out about 1 acre of the 3 acre property. We were thinking keeping or selling as a STR, but now I understand that STR's are not doing as well. We had also thought to maybe keep the house as a LTR and build a duplex beside it. But to do this would need to re-survey it to get the 1.5acre for the duplex required by the county, not a big deal... We just don't know which direction to go...

any advice?

Amanda Barnes · Answer

Forgot to say one of the most important things... We lived here ourselves for years and made it our own.  Took it from a 3/1.5 to a 1/1.5.  it's about 1400sf.  How difficult will this make the sale?

Scott E. · Answer

If you're going the sale route, it probably makes sense to bring it back to a 3/1.5

Building a duplex next door is a good concept. But cost of construction is high right now. My guess is that you would not cash flow enough compared to how much you need to put into it. Although you do already own the land so that might help.

You just need to underwrite the deal. For example, if it costs you $600k to build the duplex but the duplex will crank out $100k in gross revenue as STRs, then that's not a horrible ROI (after accounting for expenses)

Pat Lulewicz · Answer

@Amanda Barnes what has led you to believe the STRs are not doing well? Do you have a good idea about the cash flow you can expect from an STR strategy vs LTR?

Have you verified the zoning on the duplex? If so - I think it would be a great strategy to do that given the location and still allowing each property to sit on 1.5 acres. There are a number of lenders that will cover a substantial amount of the development costs since y'all have owned the home, and land, for over 12 month and that could help with financing the build costs as those will get high.

Sophia Griffies · Answer

Hey Amanda,

This sounds like a very unique property with lots of potential!  Have you consulted with a property manager to confirm how much you could expect to net on a short or long term rental (with and without the duplex)?   If not, I think that should be your first step. Then consult with a qualified realtor to find out what you could potentially net if you decide to sell. It's all about the numbers and your personal situation/motivations. Feel free to let me know if you need property manager recommendations, and I'd be glad to provide a consultation for you on the realtor side if you're not already working with someone.

Sophia