Two Properties on a Single Lot - Financing Options
Hello BP,
I have been running into a recurring trend in searching for deals. Two properties located in a single lot. The primary issue with this is that financing sources (traditional and hard money lenders) are having a hard time quantifying a valuation. Example:
- Two (2) duplexes on a single lot (four (4) doors total)
- Sales price - $250,000
- Assume the properties require $50,000 worth of updates
- All in cost - $300,000
- We can pull some comps for a single duplex going for about $150,000
The strategy would be to split the lot in two and have a duplex in each. This process does take time and effort (going through the city/county to seek a variance, complete a survey, file the docs with the correct jurisdiction) but not impossible. This would satisfy the parties by showing a single dwelling on a single lot and get the appraisal. Sellers typically do not want to go through the splitting process and incur those costs.
The problem I am having is identifying the initial funding sources. I am putting money into the deal (20%-30%) but would prefer not to fund all of it. Please advise.
Most Popular Reply
What's the play here, @Milton Rivera? If it costs $300k ($250k purchase + $50k reno) to hit an ARV of $300k (2X $150k), there's no profit even before accounting for the costs associated with splitting the lot, etc.