What is the deal with multiple houses on a single plot?

Question

Hi BP! I am currently looking for small multi-family units around the Tacoma WA area and I keep running across listings with several houses on a single parcel. I can see some downside in purchasing these (vs. a single building) as now you have multiple roofs etc. But is there any real reason to not consider these? (e.g., Is it harder to get financing? Do they depreciate differently than a single building?)

Account Closed · Answer

@Heather R.we own 5 places that have multiple buildings on a single tax parcel in everett. Most are "fourplexes" with a triplex in front and standalone in back. People love the standalone units because they are like a house but owner pays WSG. As such we receive ALOT more rent for these units. As mentioned there is more upkeep and insurance pretexts the two buildings individually. We have had zero issues financing them with conventional loans. Good luck!

Ike Hobbs · Answer

It can sometimes be a zoning issue but normally it's an access, setback and easement issue. Subdivide the property and the back house doesn't have access to the road legally or variables of that same issue. I know a rehabber here in this area (he posted it online also so you may have seen this) who subdivided a duplex off of a lot with two other houses, and had to redo some windows to make the firerated because it was so close to an existing building. Subdividing is an obstacle, but if you tackle it and know what you're doing, there's a lot of opportunity.

Oh and ADU's/MIL's are not the same as multifamily for zoning purposes. That's why they're a neat workaround if you have a big lot and want to do something with it but can't get the zoning fixed.

Shawn Ackerman · Answer

@Heather R. our lender treats them as a multi-family if they are all on the same tax key.  There is a greater demand for SFR's and better exit strategy for single units.  Is the water separately metered? In Milwaukee that's a setback as the water is if not the biggest, one of the biggest expenses in our investment area.  Definitely pros and cons to these type of deals.  All the best.

Ike Hobbs · Answer

A couple things could be going on here. 1. They can be older houses, built before regulations were quite as strict and now grandfathered in. 2. They could have been built on a property where the owner has so far decided not to go through the hassle of subdividing. 3. It's Tacoma, there's some weird stuff here so who knows.  They can be a good opportunity if you're willing to work through the hassle of subdividing and then sell them off, however there's usually a reason the current owner hasn't done this. I've seen it a couple of times where they're both on the same meter and/or water & sewer so the expense of separating and dividing isn't worth it.

From a landlord point of view, owning 2 houses on one lot usually isn't great as there's more maintenance with slightly higher reward from a normal duplex.

Financing can also be an issue for resale.

Jesse Gaw · Answer

@Heather R. I realize this is an older thread but i am dealing with a similar situation here in Indiana. My lender makes it sound like financing 2 houses 1 property is a no-go. How were you able to get financing or work around this issue? Thanks

Heather R. · Answer

Account Closed Thanks for the info! It is nice to know financing isn't always an obstacle in this situation and that it can work out ok!

Heather R. · Answer

@Isaac Hobbs That makes a lot of sense - thank you! I will dig into the local rules around subdividing and see if this is a strategy I can use!

Anthony Gayden · Answer

Sometimes they are zoned as multi-family, sometimes as single family. It depends.

Heather R. · Answer

@Shawn Ackerman I am not sure if the water is metered separately - I will make sure to check that! Thank you!

What is the deal with multiple houses on a single plot?

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