Question concerning parceling and financing

3 Replies

I am looking into a 1.8-acre piece of property in my local area. About in the middle of the property is a SFR that is in need of minor updates and repairs and on the northern portion of the property are two single-wide trailers (southern portion is pasture). The property is currently zoned "Multiple Residences SFR and MH".

My idea is that I would purchase the property with bank financing, divide the property into 3+ parcels (one being the lot with the house, the other two being on either side of the house), rehab the home and sell it to get my investment back. I would be left with two essentially free pieces of property on either side of the home that I would then bring more mobile homes onto for rentals. I will obviously do my due diligence concerning the zoning, etc. before committing to anything. 

Ideally this is how I envision the deal (round numbers strictly for explanation):

Purchase: $100,000 (20% down, 30-year loan)

Rehab: $20,000

Sale: $120,000

I'd love to keep the loan in place and take the cash from the sale to pay for the mobile homes, other properties, etc, but I have a feeling that is not a possibility. I assume I would have to pay off the loan at the sale of the home and somehow refinance to pay for the mobile homes. 

Any thoughts, ideas, concerns? Thanks in advance!

You should speak to a banker in advance.   Assuming they lent you the funds as a rental property, you will undoubtedly need their blessing or lien release before you split the parcel.  It won't help your cash flow timing if you have to pay off the loan before you line up a buyer for the home at the close of escrow, timed with your lot split.  That gets complicated.  

Your other angle would be to find a non bank lender (hard money) person who understands what you are trying to accomplish and get them on board from day 1.  The difference is that a bank might charge you 4% interest while a hard money guy will charge you 12%.  That may sound like a lot, but would not for a regular flip. 

You also need to understand from your local zoning/planning authority how difficult it would be to split the lot, and if you do, how expensive it will be to connect to utilities etc for any additional mobile homes you try to set up. 

Go talk to your planning department and go talk to a bank.  

@Tom V. Thanks for the input! I will definitely be speaking with both of these entities before moving forward. I'm liking the sound of private/hard money as this would allow me much more flexibility.