I have an opportunity to purchase my late parents property from my two siblings who want to sell the property by me buying them out. I am trying to decide if I should try and make this deal happen. The property consists of two lots which has an older 4 bedroom home( 2,000 sq ft) and studio apartment (400 sq ft )grossing about $2450 a month rents combined and a small landlocked lot joined to the primary lot that may not be a lot of legal record. It costs about $1,000 to get a land use directors interpretation on whether that lot is build- able.
The appraised price of the house is $429,000 and the land locked lot $78000. The property value may have as much as doubled over the past 5 years. The combined properties .61 acres R-5 zoning could be subdivided into 2 or 3 lots. There are new 2,800-3200 sq ft homes bordering the property which recently sold for $650,000 -$750,000.
Would it be smart to try and subdivide the property and sell one or two lots or retain a lot or two and sell the old 1951 home in fair condition?
The combined purchase price would stretch me pretty thin which would involve doing a 1031 exchange on an underperforming rental and a ton of cash. How much of a real estate or investment portfolio should be tied to a single property? Any thoughts about this scenario are appreciated. Thanks.
Sounds like you are being a collector not an investor.
I appreciate the responses from a fresh set of eyes. Sentimentality can cloud your vision. Thanks very much.
@James David Scott , Go all the way or sell. There's a natural friction between builders and developers that causes developers to over estimate the value add of entitlements alone and builders to think entitlements add no value cause they could do it themselves.
IDK man, the $489 is really for a house on a big lot. If you've got some development skills then splitting it into three and building two new with the old one on it's own (or building 3 new). $489 split among 3 lots even if you tore down the old home (with tears in your eyes I get it) would be represent a lot cost of around 21% on a house worth $750K. If you could separate the lots so the old home was one one, and then juice it to match two new ones on either side then you've go next to 0 in lot cost on two new constructions.
If you do decide to develop part - do not at any cost, sell the house before all entitlements are in place. Nothing brings out the NIMBY flag like a home newly purchased.
Why not involve your siblings as partners. Doesn't sound like they've got any vested emotion in the project.
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